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Tax Policy

Charitable Donations Fall After 2017 Tax Reform Meeting PWBM Expectations

Forbes’ senior contributor Kelly Phillips Erb wrote about the sharp fall in charitable contributions claimed by taxpayers in 2018. Recent data from the Internal Revenue Service (IRS) reveals that in 2018, charitable deductions claimed by taxpayers fell by $37 billion compared to 2017. Erb cites PWBM research, which projected a 5.1 percent reduction in total charitable giving due to the TCJA.

Payroll Tax Holiday: Budgetary, Economic, and Distributional Effects

We estimate that a one-year “payroll tax holiday” would cost the federal government between $141 and $151 billion over the standard budget window and increase GDP by 0.3 percent in 2020, with effects eventually turning slightly negative over time with higher deficits.

Policymakers Cite PWBM Estimates About Indexing Capital Gains to Inflation

On July 12, 2019, Senator Sherrod Brown (D-OH) and Ron Wyden (D-OR) wrote a letter citing PWBM to the Steve Mnuchin, Secretary of the Treasury, to reject a plan to change tax law so that capital gains would be adjusted for inflation. The law change would cut taxes paid on the sale of assets such as stocks, real estate, and other investments. The

Differential Tax Rates Create Opportunities for Tax Avoidance

On June 7, Hill staffers, fiscal experts, and PWBM gathered to discuss the federal revenue loss created by tax avoidance. The U.S. has different tax rates for different income streams, thus there are opportunities for individuals and businesses to reduce their tax bills by recharacterizing income to pay a lower rate.

The White House's Plan to Indexing Capital Gains to Inflation

Bloomberg’s Saleha Mohsin reports the Trump administration’s plan to index capital gains to inflation. Citing PWBM’s analysis, Mohsin highlights that indexing capital gains will disproportionately benefit those with high incomes. 

Policy Options to Increase Charitable Giving Using Tax Incentives

By substantially expanding the standard deduction, the Tax Cuts and Jobs Act reduced the incentive to make charitable contributions. We make use of data on non-tax itemizers to examine several potential policies designed to increase tax incentives for charitable giving. In particular, we project that a non-refundable credit for charitable contributions for filers who don’t itemize would expand giving by $208 billion (5.2 percent) and reduce tax revenue by $267 billion (0.6 percent) over the 10 year budget window. Other reforms produce smaller increases in giving along with smaller losses in revenue.

PWBM Projections In-Line with Official Government Estimates

In the Congressional Research Service’s report on the economic effects of the 2017 tax bill, Senior Specialist in Economic Policy Jane Gravelle and Specialist in Public Finance Donald Marples analyzed the effects of the Tax Cuts and Jobs Act (TCJA) on output and growth.

Federal Debt Still Matters

Lower interest rates since 2008 have reduced the cost of federal debt per dollar relative to the period before 2008. However, PWBM projects that the sheer size of federal debt will reach 190 percent of GDP by 2050 under present law. Even with low borrowing rates, stabilizing the debt-to-GDP level at its current value could increase GDP in 2050 by one to three times more than the projections we previously provided for the 2017 Tax Cuts and Jobs Act.

Tariff’s Projected to Raise Prices for Americans

The New York Times’ Jim Tankersley cites PWBM in an explanation of how Trump's tariffs erase the benefits of the current tax cuts. In particular, Tankersley finds that the benefits of Trump's tax cuts to the lower and middle classes will likely unwind as a result of his tariffs on goods from China, Mexico, and Europe.

Seven U.S. Economic Models Project Rapid Growth of Federal Debt

At the National Tax Association Spring Symposium, PWBM participated in a roundtable with other economic modelers. All modelers showed the results of cutting Social Security benefits by one-third in 2031. All models found that even with a benefit cut, by mid-century the U.S. still has a sizable debt-to-GDP ratio.

The Expansion of the EITC Across States

An interactive map shows the history of state-level expansion of the Earned Income Tax Credit (EITC) across the United States. States with Democrat governments and Democrat-Republican mixed governments are more likely to expand state-level EITC programs.

Gig Economy Workers Face Tax Hurdles

Knowledge@Wharton invited Senior Economist at PWBM, Richard Prisinzano, on as a guest speaker on April 12, 2019, as well as Christine Speidel of Villanova University’s Federal Tax Clinic , to discuss discuss personal taxes, focusing on gig economy workers.

First Tax Day Under the Tax Cuts and Jobs Act

CNN reported on the first Tax Day under the Tax Cuts and Jobs Act. Lydia Depillis highlighted key economic effects of the 2017’s Tax Cuts and Jobs Act.

Analysis of Fiscal Therapy: Conventional and Dynamic Estimates

PWBM projects that the proposals in Fiscal Therapy by William Gale would reduce the debt to-GDP ratio from 188 percent to 17 percent in 2050 and increase long-run economic output by 7 percent.

Americans Startled by Impact of New Tax Law on Returns

Knowledge@Wharton invited Senior Economist at PWBM, Richard Prisinzano, on as a guest speaker on March 12, 2019, as well as the Center for Tax Law and Policy’s Michael Knoll, to discuss the impact of the TCJA’s tax changes on tax filers this year.

Annual Data is Better than Monthly for Understanding Tax Revenues

FactCheck.org’s Eugene Kiely explored how to think about the impact of 2017’s Tax Cuts and Jobs Act (TCJA) on tax revenue through official measures of tax receipts. Treasury reports show that in 2018 tax receipts were slightly lower than in 2017. However, tax receipts in February 2019 were 10% higher than in February 2018. Kiely asked PWBM’s Alexander Arnon what these figures mean for future tax receipts.

Need Help Understanding the Impact of the New Tax Law on You? Check Out The Wall Street Journal Tax Calculator Powered By PWBM

On March 4, Dylan Moriarty and Richard Rubin presented the Wall Street Journal Tax Calculator, powered by Penn Wharton Budget Model, to help taxpayers understand tax law as they prepare their taxes. Taxpayers only need to enter a few key characteristics such as income and marital status to get an estimate of their tax liability from 2018 to 2027.

Experts Debate Impact of TCJA on Growth and Investment

The Economist’s print edition, published February 7th, reports that “Some Fights About the Tax Cuts and Jobs Act Seem Over.” Public opinion polls indicate that voters think that “large corporations and rich Americans” are the ones benefiting from the tax law. Meanwhile, policy analysts continue to debate the details.

Raising Taxes on the Rich Can Have Unintended Consequences

Penn Wharton Budget Model Senior Economist Richard Prisinzano discussed raising taxes on the wealthy with Alan Auerbach, Professor of Economics and Law at University of California Berkeley, and Knowledge@Wharton host Dan Loney. You can listen to the full discussion below.

Growth in Business Investments Tied to Oil Prices, Not Tax Cuts

The New York Times reported Tuesday that the Trump Administration’s “rosy” outlook on the U.S. economy is “increasingly diverging” from economists’ forecasts. The White House predicted that the economy will continue to grow at 3 percent through 2024 (adjusted for inflation), while the Congressional Budget Office (CBO) released their forecasts standing at 2.3 percent for 2019, slowing to 1.7 percent in 2020. Meanwhile, the Federal Reserve’s forecast also predicts 2.3 percent growth in 2019, and Goldman Sachs suggested a more conservative 2.1 percent growth this year based on consumer confidence figures and regional business surveys.