Tax Plan

December 17 - Yesterday, New York Governor David Patterson submitted to the New York State Assembly a state budget that contained between $4 to $6 billion in increased fees and taxes and $9 billion in spending cuts. Some provisions included in the budget proposal are increased fees on cell phone usage, digital content downloads, cigarettes, and non-diet beverages, and cuts in education and Medicaid spending. These provisions are designed to close the State's $15.4 billion budget shortfall, caused primarily by the economic crisis.

December 11 - Senate Finance Committee Chairman Max Baucus on Wednesday told reporters that he will pursue a two-bill tax reform strategy in the next Congress. The first bill will focus on short-term stimulus, including energy and infrastructure tax incentives, normal tax extenders, aid to states, and other provisions. A second bill will extend permanently the middle-class tax cuts which are set to expire in 2010 while modifying the estate tax and patching the Alternative Minimum Tax (AMT).

According to CQ, Democrats are planning on passing the first bill, which could cost $500 billion to $700 billion, shortly after Obama takes office. Baucus has said that roughly half the money would go to tax cuts, and half to new spending. Harvard economist Greg Mankiw posted a lengthy discussion, today, on which type of stimulus is more effective stimulus.

House Ways and Means Committee Democrats are planning on introducing a bill to cut corporate tax rates early next year, according to an article from the Dow Jones Newswire. As the article explains:

"The new legislation in the U.S. House of Representatives will be an updated version of a corporate tax code blueprint introduced by House Ways and Means Chairman Charles Rangel , D-N.Y., late last year... That bill would have cut the corporate rate from 35% to 30.5%. However, the new version will push that rate lower...The previous Rangel proposal was "revenue-neutral" in that it paid for the corporate rate reduction by repealing certain existing tax benefits. It would have raised most of the $364 billion, 10-year cost of the rate cut by repealing a deduction for domestic manufacturing activities, limiting tax breaks for multinationals' overseas income and disallowing the last-in, first-out method of accounting."

Although he provided few details, President-Elect Obama expressed support for reducing corporate tax rates - at least for domestic producers - during the campaign, and financing this reduction by cutting corporate tax loopholes.

November 6 - Yesterday, Professor Paul Caron of the popular blog TaxProf raised the question of what tax policy would look like under the Obama-Biden administration. He compiled the answers of fifteen tax professors from across the country and political spectrum. US Budget Watch has writen on the tax policies on which Senator Obama has campaigned. However, Steve Johnson of UNLV argues that:

"It would be a mistake to expect that either candidate's campaign tax planks will bear close correspondence to tax legislation actually enacted in the next 4 years."