Tax Policy

Research

The Hidden Costs of Tax Compliance Jason J. Fichtner, Jacob Feldman \| May 20, 2013 The tax code, far beyond simply collecting revenue to fund the operations of the federal government, attempts to perform policy and political functions as well. This paper does not examine the normative value of these provisions, but instead examines the hidden costs of today’s tax code: time and money spent submitting tax forms, foregone economic growth, lobbying expenditures, and gaps in revenue collection. These problems grow larger as the Internal Revenue Code becomes more complicated and temporary.[1] Based on the studies reviewed in this paper, we estimate that hidden costs range from $215 billion to $987 billion and that the tax code results in a $452 billion revenue gap in unreported taxes. The economic costs are substantial relative to the $2.45 trillion in revenues raised by the federal government in 2012.	The Case for Across-the-Board Spending Cuts Jeff Bergner \| Mar 26, 2013 Across-the-board cuts are often referred to as using a “meat ax,” as opposed to more carefully targeted cuts, which are compared to using a “scalpel.” Interest group pressure will weigh in against targeted cuts, however, and especially in our current divided government, across-the-board cuts are the only realistic way to cut spending.
Austerity: The Relative Effects of Tax Increases versus Spending Cuts Veronique de Rugy, Alberto Alesina \| Mar 07, 2013 There is still significant debate about the short-term economic impact of fiscal adjustments. However, as we will show in this paper, important lessons have emerged.	The Economic Situation, March 2013 Bruce Yandle \| Mar 01, 2013 There was only one lane open as I made my trip to Atlanta; the other three were blocked with those unhappy yellow and black make-believe barrels used by the highway folks. Traffic flow was constrained by efforts to repair potholes and broken pavement. We in the slow lane had little choice in the matter. Instead of 70, we were slowed to 20 miles per hour. We had to accept our fate, or find another route at the next exit.
Would Taxing Banks Really Make the Banking System Safer? David VanHoose \| Feb 28, 2013 In the wake of the 2007–09 banking crisis, some economists recommended imposing new taxes on banks. These proponents contend that policy makers could apply the taxes to correct “negative externalities,” or adverse spillover effects onto overall welfare, allegedly created by individual banks. Spillovers are assumed to arise from individually optimal bank decisions that fail to account for the higher risks that the aggregation of those choices might create for the banking system as a whole. Taxing banks is supposed to nudge the banks to restrain operations that contribute to total societal risks.	The Costs of Tax Policy Uncertainty And the Need for Tax Reform Seth H. Giertz, Jacob Feldman \| Feb 26, 2013 The American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240) may be more significant for what it does not do than for what it does. Hopes for a ‘‘grand bargain’’ were not realized. In fact, ATRA does (almost) nothing to address the major fiscal problems that the United States continues to face.

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Testimony & Comments

The Effect of Tax Increases and Spending Cuts on Economic Growth Veronique de Rugy \| May 22, 2013 Good morning, Chairman Murray, Ranking Member Sessions, and members of the committee. Thank you for the chance to discuss the effect of tax increases and spending cuts on economic growth. I appreciate the opportunity to testify today.	Increasing America’s Competitiveness by Lowering the Corporate Tax Rate and Simplifying the Tax Code Jason J. Fichtner \| Jan 31, 2012 Jason Fichtner testified before the Senate Committee on Finance about ways to increase America's competitiveness through tax reform.
Wasteful Spending Does Not Stop at Earmarks and Overpayments Veronique de Rugy \| Feb 17, 2011 Veronique de Rugy testified before the House Committee on Oversight and Government Reform about wasteful government spending.

Research Summaries & Toolkits

The FY 2014 Budget Proposals Veronique de Rugy, Jason J. Fichtner, Charles Blahous, Matthew Mitchell \| Mar 15, 2013 Despite years without a federal budget, trillion-dollar deficits, and ad hoc, crisis-driven fiscal and economic policies that failed to deal with the looming entitlement crisis, leaders on both sides in Washington are now touting seemingly miraculous progress toward a “fix” to our budgetary woes.	The Debt Ceiling: Assets Available to Prevent Default Jason J. Fichtner, Veronique de Rugy \| Jan 25, 2013 The debt ceiling, or the legal limit the federal government may borrow, is set currently at $16.4 trillion.[1] In his latest report, Secretary of the Treasury Timothy Geithner predicts that the United States will need to increase the debt ceiling sometime between February 15, 2013, and early March 2013.[2] The Congressional Research Service estimates the federal government will have to issue an additional $700 billion in debt above the current statutory limit to finance obligations for the remainder of FY2013…
Mercatus Center Policy Guide \| Aug 03, 2012 The Mercatus Center at George Mason University is pleased to provide you with our new policy guide. The guide is designed to provide easily accessible economic information that might prove useful in pre- paring for hearings or town hall meetings, drafting speeches or policy papers, and generally educating the public regarding spending, taxes, regulation, financial markets, and technology policy.	Assessing the President's FY2013 Budget Proposal \| Feb 13, 2012 This policy brief takes a look at the president's FY2013 budget proposal and emphasizes the need for fundamental reform in the areas of spending, taxes, and the budget process.
"Fixing" the Tax Code: Key Principles for Successful Reform \| Feb 01, 2012 The most basic goal of tax policy is to raise enough revenue to meet the government’s spending requirements with the least impact on market behavior. The United States’ tax code has long failed to meet this aim: by severely distorting market decisions and the allocation of resources, it impedes both potential economic growth and potential tax revenue.	Fixing the Corporate Income Tax \| Nov 2011 A new working paper, “Why the United States Needs to Restructure the Corporate Income Tax,” by Mercatus Center at George Mason University senior scholar Jason Fichtner suggests successful reform of the U.S. corporate tax code must address its fundamental problems: 1) the uncompetitive corporate income tax rate; and 2) the outdated “worldwide” system for corporate tax collection.

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Expert Commentary

The Film Tax Credit Farse Pittsburgh Tribune-Review By Antony Davies, James R. Harrigan \| May 22, 2013 Everyone loves a good movie, but with an average cost of more than $8, most Pennsylvanians have to choose carefully what they will spend their money on. Too bad we don't have that same luxury with our tax dollars, which subsidize the film industry to the tune of $60 million a year. If lobbyists for the “film tax credit” have their way, this will increase to $100 million in short order.	For Whom the Taxpayer Toils Philadelphia Inquirer By Antony Davies, James R. Harrigan \| Apr 17, 2013 Each July Fourth, Americans celebrate their freedom, the result of a revolution over "taxation without representation." This month, we celebrate another type of freedom - from our own tax man. It turns out that taxation with representation is no picnic either.
Film Tax Credits Don't Give States An Economic Boost U.S. News and World Report By Eileen Norcross \| Apr 16, 2013 From Massachusetts to North Carolina, Michigan and Iowa, a similar picture is emerging: Film tax credits don't deliver to state economies what they cost to treasuries and taxpayers.	NCAA Tax Subsidies Are the Real 'March Madness' U.S. News and World Report By Matthew Mitchell, Christopher Koopman \| Apr 08, 2013 Not everyone was able to attend this year's NCAA Men's basketball tournament in person, but a lot of taxpayers have helped pay for tickets to the games and might not even realize it.
Let Cyprus Be the Lesson Pittsburgh Tribune-Review By Antony Davies, James R. Harrigan \| Mar 22, 2013 How can the United States avoid the fate that awaits this growing list of countries? The answer to this question is as easy factually as it is difficult politically: The United States must balance its budget.	Give Sequestration a Chance Washington Examiner By Veronique de Rugy \| Mar 08, 2013 There's been lots of alarmism from interest groups about the impact of sequestration on teachers, security, White House tourism and congressional janitors. In addition, many commentators are arguing that it is wrong to reduce the burden of government spending in a weak economy -- no matter how small the actual cuts are. The evidence of the supposedly devastating impact of spending cuts, we are told, can be seen all over Europe. The solution, then, is to boost the size of government.

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Charts

A Closer Look at Senate and House Budget Proposals

The Senate Democratic and House Republican budget proposals are scheduled for consideration; the former drafted by Senate Budget Committee Chair Patty Murray, and the latter by House Budget Committee Chair Paul Ryan. The following charts compare and contrast key aspects of the Ryan and Murray plans. The charts use data from the Senate Democratic and House Republican FY 2014 budgets and the Congressional Budget Office’s most recent Budget and Economic Outlook.

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Experts

Antony Davies

Antony Davies is associate professor of economics at Duquesne University and Mercatus Affiliated Senior Scholar at George Mason University. His primary research interests include econometrics, public policy, and economic psychology.

Veronique de Rugy

Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University. Her primary research interests include the federal budget, homeland security, taxation, tax competition, and financial privacy issues.

Jason J. Fichtner

Jason J. Fichtner is a senior research fellow at the Mercatus Center. His primary research interests include Social Security, federal tax policy, federal budget policy, retirement security, and policy proposals to increase saving and investment.

Matthew Mitchell

Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University and the lead scholar on the Project for the Study of American Capitalism. His primary research interests include economic freedom and economic growth, public choice economics, and the economics of government-granted privileges to businesses.

Eileen Norcross

Eileen Norcross is a senior research fellow at the Mercatus Center at George Mason University. Her primary research interests include fiscal federalism and institutions, state and local governments, and economic development.

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Videos

Veronique de Rugy Discusses the Internet, Taxing and "Fairness" on The Blaze

Veronique de Rugy | April 22, 2013

Veronique de Rugy Discusses Sequestration on Stossel

Veronique de Rugy | February 28, 2013

Podcasts

The FY 2014 ‘Budget’: The Proposals and Where We Go from Here

Jason J. Fichtner | April 30, 2013

This Capitol Hill Campus event covered the president’s and Congress’s fiscal year 2014 budget proposals—and whether any of the proposals adequately address the nation’s long-term budget challenges.

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Recent Events

Taxes, Deficits, Debt, and Gimmicks: Appearance Versus Reality

The federal tax code runs the gamut from complicated to arcane. Over the years the code has become riddled with language that has made our tax code nearly impossible to understand.

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Books

Governing to Win: Enhancing National Competitiveness Through New Policy and Operating Approaches

Jason J. Fichtner | Aug 27, 2012

This book shows not only what is wrong with the current federal spending plan, but ways to fix it. Business professionals and anyone interested in the government’s response the recession will find this an important book. Mercatus senior research fellow Jason Fichtner authored Chapter 5: “Three Approaches to Fostering Economic Competitiveness.”…

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The Hidden Costs of Tax Compliance Jason J. Fichtner, Jacob Feldman \| May 20, 2013 The tax code, far beyond simply collecting revenue to fund the operations of the federal government, attempts to perform policy and political functions as well. This paper does not examine the normative value of these provisions, but instead examines the hidden costs of today’s tax code: time and money spent submitting tax forms, foregone economic growth, lobbying expenditures, and gaps in revenue collection. These problems grow larger as the Internal Revenue Code becomes more complicated and temporary.[1] Based on the studies reviewed in this paper, we estimate that hidden costs range from $215 billion to $987 billion and that the tax code results in a $452 billion revenue gap in unreported taxes. The economic costs are substantial relative to the $2.45 trillion in revenues raised by the federal government in 2012.	The Case for Across-the-Board Spending Cuts Jeff Bergner \| Mar 26, 2013 Across-the-board cuts are often referred to as using a “meat ax,” as opposed to more carefully targeted cuts, which are compared to using a “scalpel.” Interest group pressure will weigh in against targeted cuts, however, and especially in our current divided government, across-the-board cuts are the only realistic way to cut spending.
Austerity: The Relative Effects of Tax Increases versus Spending Cuts Veronique de Rugy, Alberto Alesina \| Mar 07, 2013 There is still significant debate about the short-term economic impact of fiscal adjustments. However, as we will show in this paper, important lessons have emerged.	The Economic Situation, March 2013 Bruce Yandle \| Mar 01, 2013 There was only one lane open as I made my trip to Atlanta; the other three were blocked with those unhappy yellow and black make-believe barrels used by the highway folks. Traffic flow was constrained by efforts to repair potholes and broken pavement. We in the slow lane had little choice in the matter. Instead of 70, we were slowed to 20 miles per hour. We had to accept our fate, or find another route at the next exit.
Would Taxing Banks Really Make the Banking System Safer? David VanHoose \| Feb 28, 2013 In the wake of the 2007–09 banking crisis, some economists recommended imposing new taxes on banks. These proponents contend that policy makers could apply the taxes to correct “negative externalities,” or adverse spillover effects onto overall welfare, allegedly created by individual banks. Spillovers are assumed to arise from individually optimal bank decisions that fail to account for the higher risks that the aggregation of those choices might create for the banking system as a whole. Taxing banks is supposed to nudge the banks to restrain operations that contribute to total societal risks.	The Costs of Tax Policy Uncertainty And the Need for Tax Reform Seth H. Giertz, Jacob Feldman \| Feb 26, 2013 The American Taxpayer Relief Act of 2012 (ATRA, P.L. 112-240) may be more significant for what it does not do than for what it does. Hopes for a ‘‘grand bargain’’ were not realized. In fact, ATRA does (almost) nothing to address the major fiscal problems that the United States continues to face.

The FY 2014 Budget Proposals Veronique de Rugy, Jason J. Fichtner, Charles Blahous, Matthew Mitchell \| Mar 15, 2013 Despite years without a federal budget, trillion-dollar deficits, and ad hoc, crisis-driven fiscal and economic policies that failed to deal with the looming entitlement crisis, leaders on both sides in Washington are now touting seemingly miraculous progress toward a “fix” to our budgetary woes.	The Debt Ceiling: Assets Available to Prevent Default Jason J. Fichtner, Veronique de Rugy \| Jan 25, 2013 The debt ceiling, or the legal limit the federal government may borrow, is set currently at $16.4 trillion.[1] In his latest report, Secretary of the Treasury Timothy Geithner predicts that the United States will need to increase the debt ceiling sometime between February 15, 2013, and early March 2013.[2] The Congressional Research Service estimates the federal government will have to issue an additional $700 billion in debt above the current statutory limit to finance obligations for the remainder of FY2013…
Mercatus Center Policy Guide \| Aug 03, 2012 The Mercatus Center at George Mason University is pleased to provide you with our new policy guide. The guide is designed to provide easily accessible economic information that might prove useful in pre- paring for hearings or town hall meetings, drafting speeches or policy papers, and generally educating the public regarding spending, taxes, regulation, financial markets, and technology policy.	Assessing the President's FY2013 Budget Proposal \| Feb 13, 2012 This policy brief takes a look at the president's FY2013 budget proposal and emphasizes the need for fundamental reform in the areas of spending, taxes, and the budget process.
"Fixing" the Tax Code: Key Principles for Successful Reform \| Feb 01, 2012 The most basic goal of tax policy is to raise enough revenue to meet the government’s spending requirements with the least impact on market behavior. The United States’ tax code has long failed to meet this aim: by severely distorting market decisions and the allocation of resources, it impedes both potential economic growth and potential tax revenue.	Fixing the Corporate Income Tax \| Nov 2011 A new working paper, “Why the United States Needs to Restructure the Corporate Income Tax,” by Mercatus Center at George Mason University senior scholar Jason Fichtner suggests successful reform of the U.S. corporate tax code must address its fundamental problems: 1) the uncompetitive corporate income tax rate; and 2) the outdated “worldwide” system for corporate tax collection.

The Film Tax Credit Farse Pittsburgh Tribune-Review By Antony Davies, James R. Harrigan \| May 22, 2013 Everyone loves a good movie, but with an average cost of more than $8, most Pennsylvanians have to choose carefully what they will spend their money on. Too bad we don't have that same luxury with our tax dollars, which subsidize the film industry to the tune of $60 million a year. If lobbyists for the “film tax credit” have their way, this will increase to $100 million in short order.	For Whom the Taxpayer Toils Philadelphia Inquirer By Antony Davies, James R. Harrigan \| Apr 17, 2013 Each July Fourth, Americans celebrate their freedom, the result of a revolution over "taxation without representation." This month, we celebrate another type of freedom - from our own tax man. It turns out that taxation with representation is no picnic either.
Film Tax Credits Don't Give States An Economic Boost U.S. News and World Report By Eileen Norcross \| Apr 16, 2013 From Massachusetts to North Carolina, Michigan and Iowa, a similar picture is emerging: Film tax credits don't deliver to state economies what they cost to treasuries and taxpayers.	NCAA Tax Subsidies Are the Real 'March Madness' U.S. News and World Report By Matthew Mitchell, Christopher Koopman \| Apr 08, 2013 Not everyone was able to attend this year's NCAA Men's basketball tournament in person, but a lot of taxpayers have helped pay for tickets to the games and might not even realize it.
Let Cyprus Be the Lesson Pittsburgh Tribune-Review By Antony Davies, James R. Harrigan \| Mar 22, 2013 How can the United States avoid the fate that awaits this growing list of countries? The answer to this question is as easy factually as it is difficult politically: The United States must balance its budget.	Give Sequestration a Chance Washington Examiner By Veronique de Rugy \| Mar 08, 2013 There's been lots of alarmism from interest groups about the impact of sequestration on teachers, security, White House tourism and congressional janitors. In addition, many commentators are arguing that it is wrong to reduce the burden of government spending in a weak economy -- no matter how small the actual cuts are. The evidence of the supposedly devastating impact of spending cuts, we are told, can be seen all over Europe. The solution, then, is to boost the size of government.

Tax Policy

Tax Policy

Research

Testimony & Comments

Research Summaries & Toolkits

Expert Commentary

Charts

Experts

Videos

Podcasts

Recent Events

Books

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