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Taxes: Supportive to some, desired by others, and absent for many

No one seems to like to bring up arguments in favor of taxes -- except perhaps policy makers -- but the Tax Policy Center notes there are ways of making taxes simpler to implement and fairer to those who pay them. 

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Susan Walsh/AP/File
The exterior of the Internal Revenue Service building in Washington. The head of the Tax Policy Center – a program overseen by the Urban Institute and the Brookings Institution – said yesterday that there are ways to boost the economic prospects of middle class taxpayers, such as indexing tax credits to what he called "inequality."
  • By Renu Zaretsky Guest blogger

Tax policy could help the middle class. TPC director Len Burman testified before the Senate Finance Committee yesterday and suggested several ways to  improve the middle class’ economic prospects: Increase  access to higher education and job training and consolidate and target education tax subsidies; slow the growth of health care spending; eliminate the carried interest loophole; and encourage retirement saving. He also proposed rethinking the way tax credits and other provisions are adjusted each year. Instead of indexing for inflation, he proposed indexing for inequality. You can watch the entire hearing here.

But folks are shopping whether or not, or wherever, they’re paying taxes. Retail sales are up, an online marketplace’s prime membership fee is up… and the House Judiciary Committee is considering an alternative internet sales tax: Impose the levy  based on the retailer’s home state rather than the consumer’s residence. But critics say it would be easy for online retailers to game such a tax.

And certain activities remain tax free. Prostitution is illegal (in states other than Nevada), unsafe, and untaxed. Yet, in just eight cities, it generated $1 billion in revenue in 2007, according to a landmark Urban Institute study. Even Nevada, where prostitution is legal in rural counties, does not tax the enterprise. But the recent weak economy prompted the state legislature to consider a sales tax for brothels, while some Nevada brothels recently tried and failed to pay state taxes in order to help solidify their legal status in the state.

Interested in subscribing to The Daily Deduction, the Tax Policy Center summary of the day’s tax news? Sign-up here for free access. If you’d like to tell us about a new research paper or have any comments about our new feature, write us at dailydeduction@taxpolicycenter.org.

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