Tag: income tax

Income tax withholding payments stumble again

Mary Pat Campbell

Link: https://angrybearblog.com/2023/04/income-tax-withholding-payments-stumble-again

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The important data this week will include new home sales tomorrow, Q1 GDP and initial jobless claims on Thursday, and most importantly of all (imo) real personal income and spending, along with real manufacturing and trade sales on Friday.

In the meantime, today let me take another look at a significant coincident indicator, income tax withholding payments, because the situation has changed in the past week.

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For the nation as a whole Matt Trivisonno has the YoY data, measuring the entire 365 day total of tax withholding vs. the entire previous 365 days, and has a public graph with a 3 month delay. Here’s his latest:

Like the California graph, it shows a steep deceleration during 2022, which had been as high as +21% YoY in March, down to only about +6% by the end of December. Thereafter through January, the YoY data stabilizes.

Indeed, by my own calculations, for the first three months of fiscal 2023 ending December 31, withholding tax payments were only up +1.2% YoY. But for Q2 they rebounded sharply, up +5.4% YoY. 

But in the last 10 days they have stumbled. For the first 14 withholding days in April, payments are down -3.4%, $189.7 Billion vs. $196.3 Billion one year ago. For the last 4 weeks as a whole, withholding payments are down -5.0%, $270.2 Billion vs. $284.5 Billion.

Author(s): New Deal democrat

Publication Date: 25 April 2023

Publication Site: Angry Bear

12 States High Earners Are Flocking To

Mary Pat Campbell

Link: https://www.thinkadvisor.com/2022/08/11/12-states-most-high-earners-are-moving-to/

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U.S. households that earn upward of $200,000 a year can have a significant impact when they move between states, despite their relatively small numbers, according to a recent analysis by SmartAsset. In 2020, these tax filers comprised 6.8% of total tax returns filed across the 50 States and the District of Columbia.

High-earning households’ influence is so great because a state that loses more of them than it gains in a given year may experience a decline in tax revenues and its fiscal situation may worsen.

As part of its analysis, SmartAsset identified the states with the most movement of high-earning households. Researchers examined the inflow and outflow of tax filers making at least $200,000 in each state and the District of Columbia between 2019 and 2020.

Author(s): Michael S. Fischer

Publication Date: 11 Aug 2022

Publication Site: Think Advisor

Individual Income Tax Payments on Pace to Reach Record Level

Mary Pat Campbell

Link: https://www.wsj.com/articles/individual-income-tax-payments-on-pace-to-reach-record-level-11654421400

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An unprecedented gush of income-tax revenue is flowing into the federal government, driven in part by investors and business owners, and the size and speed of the increase has surprised even the nation’s fiscal-policy experts.

Individual income tax collections are poised to reach $2.6 trillion, or 10.6% of the economy in the fiscal year that ends Sept. 30, according to the Congressional Budget Office. That is up from 9.1% in 2021 and would mark a record in the 109-year history of the tax, topping the war-tax receipts of 1944 and the dot-com boom of 2000.

The surge has been particularly notable in taxes outside paycheck withholding, a signal that capital gains and business income are driving the trend. The Penn Wharton Budget Model estimates collections of non-withheld taxes reached an inflation-adjusted $522 billion in April 2022, compared with just over $300 billion in 2018 and 2019, before the pandemic.

Author(s): Richard Rubin, Amara Omeokwe

Publication Date: 5 June 2022

Publication Site: WSJ

How have federal income and payroll tax bills changed for US families in the last 30 years?

Mary Pat Campbell

Link: https://usafacts.org/articles/how-have-federal-income-and-payroll-tax-bills-changed-for-us-families-in-the-last-30-years/

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From 1988 to 1993, the average federal income tax bill for American families increased by over $1,000 in 2019 dollars. Families in the top 1%, the middle class and elderly families had increases in their federal income tax bills. But for middle-class families with children, tax bills over that time decreased.

The payroll tax changes caused the average payroll tax liability for employers and employees combined to increase by nearly $400. Payroll tax policy hasn’t changed significantly since the 1993 law.

Publication Date: 26 April 2022

Publication Site: USA Facts

What is good tax policy?

Mary Pat Campbell

Link: https://allisonschrager.substack.com/p/known-unknowns-1c3?utm_medium=email&utm_campaign=cta

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So the goal of tax policy should be taking as much revenue as you can while trying to minimize distortions. Some kinds of taxes are more distortionary than others. In order of least to most harmful, it goes

1.     Consumption taxes

2.     Income taxes

3.     Wealth taxes

Cut to our current tax debate, where these concerns get no attention. The goal seems less about minimizing distortions/maximizing revenue and more about punishment, i.e., rich people for making too much in a zero-sum world and corporations for being greedy. Now, I think our tax system should be more progressive, too. But there are good and bad ways to achieve that goal.

Author(s): Allison Schrager

Publication Date: 6 July 2021

Publication Site: Known Unknowns at substack

Testimony: Senate Budget Committee Hearing on the Progressivity of the U.S. Tax Code

Mary Pat Campbell
Testimony: Senate Budget Committee Hearing on the Progressivity of the U.S. Tax Code

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In case you are thinking, “Well, the rich make more, they should pay more,” the top 1 percent of taxpayers account for 20 percent of all income (AGI). So, their 40 percent share of income taxes is twice their share of the nation’s income.  

Similarly, in 2018, the top 0.1 percent of taxpayers paid $311 billion in income taxes. That amounted to 20 percent of all income taxes paid, the highest level since 2001, as far back as the IRS data allows us to measure. The top 0.1 percent of taxpayers in 2018 paid a greater share of the income tax burden than the bottom 75 percent of taxpayers combined.

Author(s): Scott A. Hodge

Publication Date: 25 March 2021

Publication Site: Tax Foundation

Memo to Dems: Don’t Lift SALT Cap to Help the Rich, Help States Directly Instead

Mary Pat Campbell

Link: https://www.realclearpolicy.com/articles/2021/03/01/memo_to_dems_dont_lift_salt_cap_to_help_the_rich_help_states_directly_instead_685729.html

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But at a national level, it is much less clear that the SALT deduction makes for good politics. Most of the key swing states, including Georgia, Pennsylvania, North Carolina, New Hampshire, and Arizona were below the national average in the value of the SALT deduction as a percent of adjusted gross income before the new cap. Florida and Nevada were in the bottom seven states.  

Of course, states and local governments do need help from the Federal government. In fact, more help is needed now more than ever. The pandemic is hurting state and local government revenues, to the tune of around $350 billion over the next three years. Now is the time to enact a better federal support system for states and localities, and to replace the SALT deduction, rather than revert to the previous system. 

The good news is that there are a number of good policy options available to legislators, many of which were outlined at a recent Brookings event on this subject, and any of which would be much fairer and more effective than lifting the SALT deduction cap. The key point is that Congress should help states directly, rather than through the long, roundabout route of a regressive tax break to individuals.  

Author(s): Richard V. Reeves, Christopher Pulliam

Publication Date: 1 March 2021

Publication Site: Real Clear Policy

Big Tax Cut For The Rich Sought By Illinois Progressives In Congress – Quicktake

Mary Pat Campbell
Big Tax Cut For The Rich Sought By Illinois Progressives In Congress – Quicktake

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Illinois Senators Dick Durbin and Tammy Duckworth, as well as Illinois Rep. Brad Schneider, are leading the charge to repeal the cap on state and local tax deductions, as reported by Crain’s and elswehere. They’ve each sponsored bills to eliminate the SALT cap, as it is called, which became law in 2017.

That cap of $10,000 on deductibility of state and local taxes, including property taxes, walloped many high income taxpayers not just by increasing their federal tax bill but by reducing the value of homes they own. We described the research showing that in our recent article here.

There’s actually no debate about it: Liberal and conservative tax experts alike agree that the eliminating the SALT cap would be a windfall for high earners. The conservative Tax Foundation explained why here, and the liberal Institute on Taxation and Economic Policy, ITEP, wrote this in an article opposing elimination of the cap:

Author(s): Mark Glennon

Publication Date: 2 February 2021

Publication Site: Wirepoints

To What Extent Does Your State Rely on Individual Income Taxes?

Mary Pat Campbell
To What Extent Does Your State Rely on Individual Income Taxes?

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Sources of state revenue have come under closer scrutiny in light of the impact of the coronavirus pandemic, as different tax types have differing volatility and economic impact—although even beyond these unique circumstances, it is important for policymakers to understand the trade-offs associated with different sources of tax revenue. This week’s map looks at what percentage of each state’s state and local tax collections is attributable to the individual income tax.

State and localities rely heavily on the individual income tax, which accounted for 24.2 percent of total U.S. state and local tax collections in fiscal year 2018, the latest year for which data are available. The individual income tax ranks just above the general sales tax (23.3 percent) and behind property taxes (31.1 percent), taking its place as the second largest source of state and local revenue.

Author(s): Janelle Cammenga

Publication Date: 10 February 2021

Publication Site: Tax Foundation

The 16th Amendment: How the U.S. Federal Income Tax Became D.C.’s Favorite Political Weapon

Mary Pat Campbell

Link: https://ammo.com/articles/us-federal-income-tax-guide-16th-amendment-history

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One of these political events was the War of 1812. This war may have inspired Francis Scott Key to write “The Star-Spangled Banner” as he famously watched the rockets red glare over Fort McHenry, but it was also straining our fiscal resources and the war effort needed to be financed.

Enter the idea of a progressive income tax – based on the British Tax Act of 1798 (which should have been our first warning). Fortunately for the time, the War of 1812 came to a close in 1815, and the discussion of enacting an income tax was tabled for the next few decades.

Ever so stubborn, progressive individuals were hell-bent on enacting income taxes, and they eventually found a way to do this at a local and state level. In time, they would reignite a new movement for the adoption of the federal income tax.

Author: Jose Nino

Accessed: 28 January 2021

Publication Site: ammo.com