“Who Benefits from Free Emission Allowances? An Economic Analysis of the Waxman-Markey Cap-and-Trade Program“
by Andrew Chamberlain
Abstract
Recent Congressional Budget Office (CBO) estimates of H.R. 2454, the “American Clean Energy and Security Act of 2009,” suggest the bill’s costs would be progressive across income groups. However, the analysis relies on assumptions about the incidence of free emission “allowances” that are not supported by microeconomic theory. We provide alternative estimates of the costs faced by U.S. households from the legislation. We find the bill — both on a gross and net basis — to be regressive, imposing the largest burdens on low- and middle-income households. On a net basis, households in the highest-earning quintile would actually profit by $604 per year — effectively redistributing approximately $14 billion per year from low- to upper-income households. As debate over climate policy moves to the U.S. Senate, lawmakers should be wary of these flaws in the structure of the Waxman-Markey cap-and-trade bill.* * *
“MyGovSpending, Inc. Tax Calculator Model: Methodology and Data Sources“
by Andrew Chamberlain and Gerald Prante
Abstract
The MyGovSpending, Inc. tax calculator is based on a microsimulation model developed by Chamberlain Economics, L.L.C. The model features a statistically matched database of U.S. households that combines demographic, tax, income, and expenditure data from a variety of sources into a single database that allows detailed estimation of family tax burdens. This memo outlines the methodology used to develop the tax model, as well as the data sources and definitions used. (View the tax calculator here.)* * *
“Who Pays for Climate Policy? New Estimates of the Household Burden and Economic Impact of a U.S. Cap-and-Trade System“
by Andrew Chamberlain
Abstract
Many U.S. lawmakers view cap and trade as a politically superior non-tax approach to climate policy. However, cap and trade imposes identical economic burdens on households to a similarly designed carbon tax. Using the newly-released 2002 input-output accounts we present new estimates of the distributional impact of a typical cap-and-trade system by income, age, U.S. region and family type. In total, households would face an annual burden of roughly $144.8 billion per year with costs disproportionately borne by low-income households, those under age 25 and over 75 years, those in Southern states, and single parents with dependent children. Lawmakers weighing the costs and benefits of climate policy should be aware that cap and trade would impose a significant and regressive annual burden on U.S. households.* * *
“Core Concepts: The Economics of Tax Incidence“
by Andrew Chamberlain
Abstract
Tax incidence is a fundamental concept underlying tax modeling and the economic analysis of tax policy. This article provides a brief overview of key theoretical concepts related to tax incidence, and how they are derived analytically from simple models of price elasticity of supply and demand in the marketplace.
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“Business & Occupation Tax Reform, Part IV“
by Andrew Chamberlain and Carl Gipson
Abstract
Using newly released 2002 Washington State input-output data, we provide the first estimates of tax pyramiding from the state’s Business & Occupation (B&O) tax since 2001. We find tax pyramiding is more severe than found by previous studies that did not distinguish between imported and domestically produced products. We find the B&O tax pyramids an average of 3.0 times, ranging from 1.6 times on architectural, engineering and computing services to 16.7 times on petroleum and coal products manufacturing.
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“City of Seattle Street Use Cost Center Rate Study“
by Andrew Chamberlain
Abstract
This study develops the 2009-10 rate proposal for the Seattle Department of Transportation’s Street Use cost center. The structure of the cost center, sources of data, and basis for various forecasts are explained in detail. This paper was prepared as part of the city’s biennial rate adjustment process for right-of-way permit fees and charges.
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“Estimating the Tax Burden and Economic Impact from the Proposed ‘Gang of Ten’ Revenue Offsets“
by Andrew Chamberlain
Abstract
The recently released Gang of Ten energy proposal includes revenue offsets that would exclude domestic oil and gas companies from the Section 199 deduction for domestic production activity. Using a simple input-output model we estimate the state-by-state impact of this proposal on tax burdens, employment, household earnings and economic output. We estimate the proposal will increase corporate tax burdens by approximately $13.57 billion over ten years, 44 percent of which will fall on households in the petroleum manufacturing states of Texas, California and Louisiana. Using RIMS II multipliers we estimate the proposal will reduce U.S. employment by roughly 637,000 jobs over ten years, reduce household earnings by $34.97 billion, and reduce total U.S. economic output by $185.95 billion.
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“Estimating Federal Tax Burdens for Major City Areas, Counties, and U.S. Congressional Districts“
by Andrew Chamberlain and Gerald Prante
Abstract
The burden of federal taxes does not fall equally on the cities, counties and congressional districts that comprise the geographic landscape of the United States. Because tax collections figures provide little information about the true economic burden of taxes, researchers must employ various statistical methods to estimate the economic incidence of federal taxes across geographic areas. We outline a detailed methodology for modeling the burden of each federal tax – individual income, corporate income, payroll, estate and gift, and all excises – by narrow geographic areas. Using this model, we provide estimates of federal tax burdens by three geographic areas for Calendar Year 2004: major city area, county and U.S. congressional district.
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“Who Pays Taxes and Who Receives Government Spending? An Analysis of Federal, State and Local Tax and Spending Distributions, 1991-2004“
by Andrew Chamberlain and Gerald Prante
Abstract
While the U.S. tax system is progressive, the distribution of government spending makes the overall fiscal system more progressive than is apparent from tax distributions alone. Using a microdata model we estimate the distribution of federal, state and local taxes and spending between 1991 and 2004. We find households in the lowest quintile of income received roughly $8.21 in federal, state and local government spending for every dollar of taxes paid in 2004, while households in the middle quintile received $1.30, and households in the top quintile received $0.41. Overall, tax payments exceeded government spending received for the top two quintiles of income, resulting in a net fiscal transfer of between $1.031 trillion and $1.527 trillion between quintiles. Both taxes and spending appear to have large distributional effects on households, and these effects have grown since 1991. The results suggest tax distributions alone are an inadequate measure of progressivity, and policymakers should examine both tax and spending distributions when judging the overall fairness of policy toward income groups.
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“Tax Pyramiding: The Economic Consequences of Gross Receipts Taxes“
by Andrew Chamberlain and Patrick Fleenor
Abstract
State governments have traditionally raised revenue from business by taxing corporate income. But in recent years the growing difficulty of administering state corporate income taxes has prompted a search for alternative ways of taxing companies. This search for new business taxes has ironically sparked a resurgence in one of the world’s oldest broad-based tax structures: the gross receipts tax, also known as the turnover tax.While gross receipts taxes appear to be a simple alternative to complex corporate income taxes, this simplicity comes at a great cost. Gross receipts taxes suffer from severe flaws that are well documented in the economic literature, and rank among the most economically harmful tax structures available to lawmakers. The economic problems with gross receipts taxes are not the result of poor implementation by lawmakers. The flaws are inherent in their design. State lawmakers searching for alternatives to complex state corporate income taxes should be wary of gross receipts taxes, and should instead seek more economically neutral ways of taxing business.
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“2007 Annual Survey of U.S. Attitudes on Taxes and Wealth“
by Andrew Chamberlain
Abstract
This report summarizes the findings of our third annual survey of U.S. opinions on taxes. All results are based on a Harris Interactive® survey conducted on behalf of the Tax Foundation between March 5 and 12, 2007. The survey covers a nationwide cross section of 2,012 U.S. adults aged 18 or older. All data from this and previous years’ surveys are available for download free of charge at www.taxfoundation.org under “Public Opinion Surveys on Taxes.”
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“Generational Equity: Which Age Groups Pay More Tax, and Which Receive More Government Spending?“
by Andrew Chamberlain and Gerald Prante
Abstract
As America’s growing number of retirees strains the nation’s fiscal system, the question of which age groups benefit most from federal policy has become more important than ever. Using a standard fiscal incidence model we find that America’s youngest households aged 25 and under received $2.32 in government spending for each dollar of taxes paid in 2004. Middle-aged households aged 45 to 54 received $0.73 per tax dollar, and America’s oldest households aged 75 and over received $4.93 per dollar of taxes paid. Over a lifetime, government spending follows a U-shaped pattern, with large education and welfare spending in youth and large Social Security and Medicare payments in old age. But even within each age group, there are large differences in taxes and government spending across households at different income levels.
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Newsletter: “Tax Watch“
edited by Andrew Chamberlain
Description
Tax Watch is the quarterly policy review of the Tax Foundation, a nonprofit think tank based in Washington, D.C. The newsletter presents the Foundation’s most recent tax policy research and analysis in a simple, attractive format. The publication serves as an ideal nonprofit fundraising and outreach tool.
