1. Evaluating the Bush tax cut
B. Watch Congress carefully on estate tax
3. Ohio filers asked to self-report catalog, Internet buys
4. Bush-Gore decision may impact future tax cases
1. EVALUATING THE BUSH TAX CUT
A. TAX CUT GOOD POLICY, BUT OBJECTIVES OPEN TO QUESTION
President George Bush's tax cut proposal is welcomed by University of Cincinnati
economics professor George Vredeveld, but not necessarily for the reasons some people are pushing it. "I think a tax cut is in order, because we have budget surpluses and these surpluses should be returned to taxpayers," says
Vredeveld, director of UC's Center for Economic Education."I don't like the argument that we should cut taxes in order to stimulate the economy, and the reason is, when you reduce taxes in any meaningful way, you really don't have a very good idea of what impact it is going to have. It could very well be that by the time we stimulate the economy, we won't want any stimulation." Vredeveld says. Vredeveld points to three questions that make a tax cut as economic stimulus unpredictable policy:
1) How long will it take to get legislation passed?
2) How long does it then take for the economy to be impacted by the tax
cut?
3) How big does the actual impact end up being?
Contact: 513-556-2079
B. POLL SHOWS OHIO MAJORITY FAVORS TAX CUT PROPOSAL
In the latest Ohio Poll, residents were asked if they favor or oppose the
federal income tax cuts proposed by President George W. Bush. Fifty-six
percent of Ohioans favor the proposed tax cuts, 35 percent oppose and nine percent are undecided. While a majority of Ohioans favor federal income tax cuts, residents are divided along partisan lines. While a large majority of Republicans (82%) favor Bush's plan, only 38 percent of Democrats favor the proposed tax cuts. Fifty percent of residents who identify themselves as Independents favor Bush's tax cut plan. The Ohio Poll, established in 1981, is a product of the University of Cincinnati's Institute for Policy Research.
Contact: Eric Rademacher, director of public polling, 513-556-3304
C. THE MYTH OF RISING TAXES
It's a myth that Americans are working longer and longer into the calendar
year to pay their taxes, according to studies by the Center on Budget and Policy Priorities, a nonprofit research organization based in Washington, D.C.
According to a report by Iris Lav, CBPP deputy director, Treasury Department
data show that a median-income family of four with two children is paying a
smaller percentage of income in federal individual income taxes than at any
time in more than three decades. Factoring in state and local taxes doesn't
change that picture, either, because they have remained relatively stable. Nor are the higher-income taxpayers paying a higher percentage of their incomes in income taxes, Lav said. A study by the center finds that the share of income taxes paid by high-income families has grown over the past decade primarily because these families have experienced dramatic increases in their incomes, not because of marginal tax rate increases enacted in the early 1990s. Lav says this explains why there is no widespread clamor for the tax cut proposed by President Bush.
Contact: 202-408-1080
Web site:
http://www.cbpp.org/4-10-00tax-rev.htm
2. INTRICACIES OF THE ESTATE TAX
A. STATES FEAR ESTATE TAX DEMISE
Despite the political outcry from its critics, the estate tax ought to be kept intact, says Paul Caron, an expert on tax law at the University of Cincinnati. Caron, associate dean for faculty research and development and the Charles Hartsock Professor of Law, has long argued that the estate tax limits dynastic wealth among America's super-rich families and is a major benefit to charitable organizations. That second point was also the argument put forward to President Bush by 120 of the country's wealthiest taxpayers last month, an effort that now seems likely to result in some sort of compromise measure.
Caron also points out that abolition of the estate tax would adversely affect most U.S. states. "There's a feature of the federal estate tax that allows a credit for a state estate tax. Ohio and virtually all of the other states have taken advantage of that mechanism, where a portion of the tax goes to the state instead of the federal government," Caron says. "Those states would lose at least $7 billion annually if they did away with the estate tax. Ohio's share alone was $140 million in 1999. You can be sure the state governors are putting a lot of pressure on over this."
Contact: 513-556-0100
B. WATCH CONGRESS CAREFULLY ON ESTATE TAX
Even families not subject to the estate tax should watch Congress carefully
when the issue comes up again. The last version passed by Congress and vetoed
by President Clinton included a separate increase in taxes, according to Rick
A. Jones, estate planning attorney in Northern Kentucky and a UC alumnus. Jones said the increase would have affected more Americans than the estate tax does. That's because it changed the way capital gains taxes are calculated on inherited stocks."Really only the top 1 percent of taxpayers are subject to the estate tax, but many more would see their taxes rising with the change that was passed under Clinton," he said. Without the estate tax, Jones warns that more of the nation's wealth would become concentrated in the hands of a small number of wealthy families, widening the gap between rich and poor.
Contact: 859-578-1000 ext. 104
3. OHIO FILERS ASKED TO SELF-REPORT CATALOG, INTERNET BUYS
Ohio taxpayers will find a new line on their state income tax forms this
year, asking them to pay any "use tax" they owe on catalog and Internet
purchases. The "use tax" is applied to purchases made from out-of-state
retailers where no tax is paid. Although the "use tax" has been Ohio law
since 1936, the 2000 tax form marks the first time the state has started
reminding taxpayers about it, according to Gary Gudmundson, communications
director of the Ohio Department of Taxation (ODT).
"We're primarily doing this because of the ever-rising lost tax revenue for both the state and local governments to remote Internet and catalog sales." Gudmundson says lost tax revenues could exceed $211 million by 2002. The "use tax rate" is equal to the sales tax in the county where the taxpayer lives. "We estimate that from the first year alone, use tax payments will total approximately $1.8 million," says Gudmundson. Because there was little advance notice, Gudmundson says taxpayers are being asked to do the best they can this year. "We think most people are honest and will report what they're liable for."
Contact: 614-644-6903
4. BUSH-GORE DECISION MAY IMPACT FUTURE TAX CASES
About the only thing that all of the Justices of the Supreme Court agreed upon in the recent Bush v. Gore decision was the general principle that federal courts should defer to state courts on matters of state law. As Justice Breyer put it in his dissent, the Justices only differed as to whether "this case [was] one of the few in which we may lay that fundamental principle aside."
But, according to Paul Caron, associate dean for faculty research and
development at the UC College of Law, federal courts regularly ignore that
fundamental principle in tax cases. "Where the Internal Revenue Code expressly incorporates state law, federal courts in a tax proceeding frequently must decide how much weight to give to a state court ruling on state law," Caron says. In 1967, the Court relied on the Erie doctrine in Commissioner v. Estate of Bosch in requiring federal courts to give "proper regard" to state court decisions. Research by Caron shows that, in practice, the federal courts have given "no regard" to state court decisions in over half the cases applying Bosch over the past 34 years. Caron argues that the federal courts should return to the "proper regard" test in order for the Bush v. Gore deference principle to have any real effect.
Contact: 513-556-0100
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