According to University of Maryland economics professor Peter Morici, the latest U.S. census figures show that sun-belt states with a favorable tax and business environment, such as Texas and Florida, are attracting more immigrants. High tax northeastern and midwestern states are losing population.
Every so often, the real world makes a mockery of the neat figures modeled by Congressional budgeteers. In 2008, U.S. individual taxpayers reported $438 billion less in capital gains than they did in 2007. This change, reported today by the IRS, resulted in about $65b less revenue than in 2007.
The other significant components of individual taxpayers’ gross income either dropped slightly, or picked up slightly, but the capital gains figure dropped a whopping 48%. To put this in perspective, the total drop in adjusted gross income from 2007 to 2008 was $425b, less than the drop in capital gains. The biggest component of AGI - – wages and salaries – - rose by a meager 1.9%.
In 2007, capital gains accounted for 10% of AGI. In 2008, it had dropped to 5%.
What this illustrates is that federal revenue has become sensitive to the performance of capital markets. When the stock market crashes, as it did in 2000 and in 2008, it causes a major impact on federal revenue in the following year.
The House last night voted 277-148 to approve the $856 billion bipartisan tax compromise negotiated at the White House, sending the bill to the President for his signature and ending more than a year of uncertainty about whether Congress would extend President Bush’s 2001 and 2003 tax cuts or allow some rates to increase to their pre-2001 levels. The bill also extends for 12 months the 0% capital gains rate for investment in small business stock and enacts a one-year payroll tax holiday that will save wage earners up to $2,136 in 2011.
Households with more than one wage earner could save substantially more, because the holiday applies to each wage earner. For example, a household with two wage earners, each earning $80,000 would save $3,200 or $266 per month in payroll tax. Under a new IRS policy announced today (IRS Notice 1036), these amounts will start appearing in employees’ paychecks no later than January 31st.
The tax bill also retroactively extends and increases the AMT exemption levels for 2010 and extends them through 2011 at a cost of $136 billion, and extends nearly all other expiring tax provisions until the end of 2011.
Incoming Chairman Dave Camp announced that the following Republican members (listed alphabetically) will join the Ways & Means Committee in the 112th Congress:
Rick Berg (ND)
Diane Black (TN)
Vern Buchanan (FL)
Jim Gerlach (PA)
Lynn Jenkins (KS)
Chris Lee (NY)
Erik Paulsen (MN)
Tom Price (GA)
Aaron Schock (IL)
Adrian Smith (NE)
The Democratic side of the panel will shrink, but the decisions on who will leave have not yet been announced.
House and Senate tax writers last night introduced bipartisan legislation to carry out the terms of the tax compromise negotiated earlier this week between top Republican and Democratic negotiators at the White House. The legislation was introduced late on December 9th as S.A. 4753 to H.R. 4853. The Senate Majority Leader filled the amendment tree and filed cloture, setting up a vote on whether to end debate at 3pm on Monday. At this point, it is unclear precisely what amendments would be allowed, but the legislation is expected to win 60 votes. After that, there would be a maximum of 30 hours of debate, a vote on final passage, and the bill would go back to the House.