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Feb. 18, 2000
Tax time looms...as do political campaigns and elections.
University of Cincinnati tax experts enter the fray with
some advice as to the best tax policies for the next president as
well as other "taxing" observations.
Table of contents
1. Long live the estate tax
2. No Y2K bugs expected for filers
3. Ban the marriage penalty
A. And restore the two-earner deduction
B. African Americans more likely to pay the marriage
penalty
4. Taxing profs electronically add up their expertise
1. LONG LIVE THE ESTATE TAX
Paul Caron, associate dean for faculty research and professor of law, disagrees with campaigning politicians
who favor abolishing the estate tax. Caron thinks criticism are
overstated and supports the intent of the tax as a democratic
tool to prevent the pooling of wealth in family dynasties. Caron
says that only 37 percent of the 400 wealthiest individuals in
1999 inherited a significant fortune, compared to a 61 percent
figure in 1984. The estate tax also curbs dynastic wealth by
encouraging bequests to charitable organizations ($14 billion in
1997). "The issue of tax cuts is likely to be one of the fault
lines in the 2000 Presidential election," Caron says. "Whichever
side wins that debate, the estate tax should not be the focus of
those tax cuts." contact: 513-556-0100
2. NO Y2K BUGS EXPECTED FOR FILERS, NO LEGISLATIVE CHANGES
Certified Public Accountant Gary Friedhoff who owns a
tax-preparation business and also serves as a UC adjunct
accounting instructor: "There wasn't much new tax legislation
last year, so there's not much that's different this year." Nor
have any Y2K blips surfaced. "All of the 1099 forms I've seen
so far have been accurate and have been arriving in a timely
fashion. There was some discussion that perhaps the IRS would
have trouble in issuing refunds, but so far, we haven't seen any
evidence of that, either. I don't think we'll know for sure that
that's okay for another couple of weeks." contact: 513-556-7064
or 513-385-1505
3. BAN THE MARRIAGE PENALTY
A. AND RESTORE THE TWO-EARNER DEDUCTION
Bob Rebelein, assistant professor of economics, arrived at UC
last fall from the U.S. Department of the Treasury where his
examination of the marriage penalty in the federal tax code --
recently debated as part of election-year politics -- resulted in
a pair of papers he co-authored: "Assessing Marriage Penalties
and Bonuses" and "Measuring the Effect of the EITC on Marriage
Penalties and Bonuses." Rebelein favors doing away with the
marriage penalty, and restoring the two-earner deduction
abolished in the 1980s. "...marriage penalties are incurred
exclusively by two-earner couples, so any proposal that is going
to fix the problem should...target...two-earner couples,"
Rebelein says. Other proposals, such as raising the standard
deduction for married couples would provide only minor reductions
in marriage penalties. contact: 513-556-2614
B. AFRICAN AMERICANS MORE LIKELY TO PAY THE MARRIAGE PENALTY
Dorothy Brown, professor of law, has researched the marriage
penalty, finding that African Americans are more likely to pay a
marriage penalty than their white counterparts. This is so, she
says, because African Americans and middle-income white
households earning between $60,000-$90,000 are most likely to
have dual wage earning spouses who contribute roughly equal
amounts to household income. The couples paying the highest
marriage penalty earn roughly equal amounts, and there are more
African American households that fit into this category than
white households. "Further, the couples receiving the greatest
marriage bonus are those in which one spouse works in the paid
labor market, and the other spouse works inside the home. The
marriage-bonus couples are most likely to be white -- at all
income levels -- but especially at upper-income levels." Brown
attributes the marriage penalty's disproportionate impact on
African American households to the wage discrimination African
Americans face in the paid labor market. contact:
513-556-0107
4. TAXING PROFS (ELECTRONICALLY) ADD UP THEIR EXPERTISE
Paul Caron, associate dean for faculty research and professor of law, created TAXPROF,
an e-mail discussion group for law school tax professors, that
now includes 200 members, representing every major law school in
the country. Caron's role as that "e-tax guy" didn't stop there.
He's now co-editor of "Tax Law and Policy," an electronic journal
for the latest tax law scholarship, and he's subject guide editor
for tax law at JURIST, a web site providing easy access to
day-to-day proceedings in the legal world. contact: 513-556-0100
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