About | HeinOnline Law Journal Library | HeinOnline Law Journal Library | HeinOnline

2 Federal Tax Policy Memo 1 (1978)

handle is hein.tera/fetxcyemo0002 and id is 1 raw text is: TAX  FOUNDATION'S

January 10, 1978                  VOL. 2  NO. 1
1825 K Street, N. W.
Washington, D.C. 20006
The Administration is out on another limb with its still hazily-articulated
tax program. No matter what specific proposals are presented in the January mes-
sages to Congress, they can hardly accomplish the multiple objectives set forth
over the last two months. Directly or indirectly the Administration has postured
a program that will strengthen the economy, make up for past inflation, offset
the added costs of social security and energy taxes, and still contain significant
reforms to make the tax system more progressive. All this, according to Decem-
ber press reports, is proposed to be done for a mere $25 billion..... Or perhaps
with mirrors.
Predictably, those most concerned with fiscal drag are urging a bigger cut,
and some a much bigger cut. To correct only for inflation's rising bracket
effect on the 1978 income tax bill of individuals would take about $6 billion. To
offset the gross cost of the additional social security and unemployment compensa-
tion taxes in 1979 -- when they really start to bite -- $16.5 billion. At this
point nobody knows what the final energy tax bill will involve; Walter Heller
estimates a net annual cost of another $6 billion. One can easily conjure up a
case for a $30-50 billion tax reduction to settle these various accounts and get
the economy really moving -- that is, if you're not squeamish about budget deficits
of even heftier proportions. Congress, of course, will have its own ideas on the
size and distribution of tax relief
Income Tax Reduction vs. Social Security Increases
The shape, if not the size, of the Administration's tax plan, as announced
on December 21, looks a bit thin to many Americans with substantial existing tax
bills. The catch-22 is that the stiff increases in payroll taxes mandated by the
1977 social security bill hit hardest at those in the upper-middle income groups
who generally would get the least in income tax reductions under the proposed
package. It is reported that the package provides rate reduction of two percentage
points perhaps across the whole schedule. But it also contains a switch to a
$250-per-dependent flat credit in place of the existing $750 personal exemption
(and $35 per person credit). This won't do much for those in the $25,000-and-up
AGI brackets. Across the overall income spectrum, the Carter tax reductions could
more than offset social security hikes, but if concern extends beyond fiscal drag
and current consumer spending to capital formation and productivity incentives,
the outlook gets muddier.
The table on page 2 shows what would happen over the next decade to the
typical taxpayer, married with two dependents, at selected AGI levels under the

What Is HeinOnline?

HeinOnline is a subscription-based resource containing nearly 3,000 academic and legal journals from inception; complete coverage of government documents such as U.S. Statutes at Large, U.S. Code, Federal Register, Code of Federal Regulations, U.S. Reports, and much more. Documents are image-based, fully searchable PDFs with the authority of print combined with the accessibility of a user-friendly and powerful database. For more information, request a quote or trial for your organization below.

Contact us for annual subscription options:

Already a HeinOnline Subscriber?

profiles profiles most