The Urban–Brookings Tax Policy Center 2005 Annual Report Independent, timely, and accessible analyses of current and emerging tax policy issues The Urban Institute, 2100 M Street, NW, Washington, DC 20037 The Brookings Institution, 1775 Massachusetts Avenue, NW, Washington, DC 20036 http://www.taxpolicycenter.org CONTENTS OVERVIEW................................................................................................... 2 2005 HIGHLIGHTS ...................................................................................... 3 NEW PROGRAM ON STATE AND LOCAL TAXATION ....................... 5 MODEL ENHANCEMENTS........................................................................ 5 OUTREACH .................................................................................................. 6 FUNDRAISING............................................................................................. 8 KEY TPC PERSONNEL.............................................................................. 9 PUBLICATIONS, REPORTS, AND COMMENTARIES ....................... 14 TESTIMONIES ........................................................................................... 19 PUBLIC FORUMS...................................................................................... 20 REVENUE AND DISTRIBUTION TABLES............................................ 20 MEDIA PLACEMENT ................................................................................ 20 1 The Urban-Brookings Tax Policy Center 2005 Annual Report OVERVIEW The Urban Institute–Brookings Institution policy options. TPC has become the news Tax Policy Center (TPC) was launched in media’s primary source of information on April 2002. In less than four years, it has tax policy issues. The TPC’s publications, achieved outstanding success in moving symposia, commentaries, and other out- forward on its primary mission: providing reach activities have attracted positive at- policymakers and the public with timely tention and coverage. As one example, and accessible facts and insights on press- many universities’ economics, law, and ing tax policy issues based on state-of-the- public policy programs have made the art modeling and research. Center’s research and web-based Tax Facts required reading in their curricula. The backbone of TPC’s research is “In a tax debate in which bombast and a detailed microsimulation model of the sound bites often crowd out facts, figures U.S. tax system that we built, maintain, and reasoned analysis, the Tax Policy and continue to develop. TPC analysts use Center provides all three, in an easy-to- this and other tools to estimate how tax access, easy-to-understand fashion.” proposals affect revenue, how tax burdens are distributed, and how taxes affect incen- David Wessel, Columnist, Wall Street Journal. tives to work and save. We also use the Transfer Income Model (TRIM) devel- oped at the Urban Institute to compare tax and spending alternatives. The two models The TPC staff includes several re- allow researchers to conduct timely analy- spected and internationally recognized ex- ses of current and emerging issues, as well perts (listed below) who have served at the as study longer-term policy trends and the U.S. government’s highest levels and who effects of taxes on economic decisions. earned outstanding reputations as scholars In 2005, we expanded the model to and motivators in framing the debate and include items on the tax reform agenda, stimulating discussion on tax policy. Poli- including consumption taxes (and variants, cymakers, the news media, universities, such as the so-called “flat tax”) and breaks advocacy organizations, and independent for charitable contributions and homeown- think tanks recognize the TPC as a com- ership—both of which would have been prehensive and credible source for up-to- significantly affected by tax reform. The date analysis and information on emerging model produces revenue and distribution 2 estimates that enable us to conduct cut- in June before the House of Representa- ting-edge analysis that we present in dis- tives’ Ways and Means Committee on The cussions with the media, public symposia, Impact of Tax Reform on Low- and Mid- congressional testimony, on-air commen- dle-Income Households. He confirmed that tary, an extensive electronic newsletter, tax reform would be a major accomplish- and TPC’s award winning web site. More ment if it made the tax system simpler, than 300 distribution and revenue tables fairer, and more conducive to economic generated by these models were posted on growth. Tax reform poses risks, however, our web site in 2005. Official revenue and for vulnerable populations that rely on the distribution estimates typically are not tax system for substantial income support. available and are often incomplete. The These low-income households count heav- information provided by the TPC, thus, ily on benefits received from refundable fills a critical void in research, policy, and tax credits such as the earned income tax media circles. credit (EITC) and the child tax credit (CTC). Indeed, the EITC is the largest source of cash assistance for low-income 2005 HIGHLIGHTS families, even bigger in the aggregate than In 2005, TPC researchers produced 9 dis- Temporary Assistance for Needy Families cussion papers, 7 policy briefs, and 67 (TANF) or food stamps. other publications and commentaries. The EITC and the CTC phase in These included a series of seminal papers with earnings, encouraging low-income on how changes in federal tax policy could family members to work. When legislators improve the eco- consider tax reform, it is therefore impor- nomic prospects of tant to look at the effects of eliminating or low- and middle- reducing these credits and thus devastating income working low-income households unless new spend- families. Five of the ing programs are created to provide cash Discussion Papers assistance. Leonard Burman discuss- and four of the Is- Codirector Peter R. Orszag testi- ing the consumption tax sues and Options fied before the on The NewsHour with Senate Finance Jim Lehrer, March 3, briefs show that 2005. federal tax policies Committee and that expand and argued that indi- modify the child and dependent care tax vidual accounts credit, the saver’s credit, and subsidies for can and should health insurance or that redirect home- Peter R. Orszag discuss- be strengthened ownership subsidies away from deductions ing Social Security re- as a supplement and toward capped credits for homeowner- form on The NewsHour to Social Secu- with Jim Lehrer, October ship could improve the economic well- 19, 2004. rity, rather than being, opportunities, and incentives for as a substitute. working families, especially for the mil- Orszag also examined other proposals for lions who live in urban areas. Social Security solvency. TPC scholars testified 11 times be- C. Eugene Steuerle, another TPC fore Congress and 4 times before the codirector, testified before the Senate Fi- President’s tax reform panel. For example, nance Committee’s Subcommittee on So- TPC codirector Leonard Burman testified cial Security and Family Policy in Sep- 3 tember 2005. His testimony, Charities on The TPC has become the news the Frontline and Making the Best Use of media’s primary source of information on Tax Policy to Help Them, outlined a com- bined legislative package that would en- hance incentives for charitable giving Newt Gingrich said, “‘That’s a stunning while also improving compliance meas- number’ referring to [TPC’s estimate ures and creating a better system of infor- that] half of black children … fail to re- mation reporting. At the same hearing, ceive the full credit. ‘I’d find a way to TPC codirector Bill Gale’s testimony, make sure those kids get the money’ as Charitable Giving and the Taxation of Es- part of a broader post–Hurricane Katrina tates, focused on the important role of the plan.” estate tax in encouraging charitable giving. Jason DeParle, “Study Finds Many Children Don’t Benefit from Credits,” New York Times, October 2, 2005. tax policy issues. In 2005, there were ap- proximately 350 major media article cita- tions (and countless regional pieces), in- cluding 66 citations in the New York Times, Washington Post, and Wall Street Journal. Jason DeParle’s October 3rd arti- cle in the New York Times, “Study Finds Many Children Don’t Benefit from Cred- its,” highlights how TPC’s research find- ings influence the sentiments of policy Gene Steuerle and Bill Gale testifying before the House Budget Committee, October 6, 2004. makers across party lines. Mr. DeParle’s article featured a recent TPC study that examined the racial disparities in the use TPC researchers are highly sought of the child tax credit, one of the tax cuts after for both their expertise and their abil- that the President argues helps low-income ity to explain complex issues in clear, families. According to the study, more comprehensible language. For example, than 25 percent of American children—50 when Alan Greenspan testified before the percent of whom are black, 47 percent tax reform panel in favor of a consumption Hispanic, and 18 percent white—do not tax, Leonard Burman and Bill Gale were fully qualify for the $1,000 per year child invited to explain the issue on Public tax credit because their family incomes are Broadcasting Service’s The NewsHour too low. According to Mr. DeParle, former with Jim Lehrer. The tax day “cover story” Republican House Speaker Newt Gingrich of CBS’s Sunday Morning featured Leo- called our finding