Alternative Rules for Limiting Tax Expenditures
Martin S. Feldstein, Harvard University

Limiting Tax Expenditures after the American Taxpayer Relief Act

Martin Feldstein∗

This memo updates my earlier analyses of alternative ways of limiting tax expenditures by incorporating the increased tax rates and other provisions of the American Taxpayer Relief Act that Congress passed at end of 2012. The memo discusses three different approaches to limiting tax expenditures.

The first section describes the advantages of an overall cap on the tax reduction that an individual can obtain from deductions and exclusions.

The second section discusses a cap on the dollar value of deductions (or deductions and selected exclusions.)

Section three considers the effect of limiting the marginal tax rate applied to deductions and certain exclusions.

All estimates refer to 2013 and make no allowance for the effect of the cap on behavior of taxpayers. These "static" estimates therefore overstate the revenue effects that would occur if implemented. Total revenue over a 10 year period would probably be 12 to 15 times larger than the revenue increase in 2013, depending on growth rates and other factors. All estimates should therefore be regarded as only approximate values.

The personal tax expenditures analyzed in this memo include all personal deductions (generally other than charitable contributions) and the exclusion of municipal bond interest and employer payments for health insurance above $8000 per taxpayer. Several variations on this are presented. Under current law, all employees will receive information about the value of their employer health insurance benefits on their W-2 forms.

The Economics of Work Schedules under the New Hours and Employment Taxes
Casey B. Mulligan, University of Chicago and NBER

In addition to the conference paper, the research was distributed as NBER Working Paper w19936, which may be a more recent version.

Myopia and the Effects of Social Security and Capital Taxation on Labor Supply
Louis Kaplow, Harvard University and NBER

In addition to the conference paper, the research was distributed as NBER Working Paper w12452, which may be a more recent version.


Below is a list of conference attendees.
Andrew Austin, Congressional Research Service
Ike Brannon, Capital Policy Analytics
David Brazell, Department of the Treasury
Nicholas Bull, Joint Committee on Taxation
Kimberley Burham, Investment Company Institute
Aaron Butz, Congressional Budget Office
James Cilke, Joint Committee on Taxation
Adam Cole, Department of the Treasury
Kevin Daly
Tim Dowd, Joint Committee on Taxation
Greg Dybalski, Government Accountability Office
Robert Gillette, Department of the Treasury
Janet Holtzblatt, Tax Policy Center
Scott Jaquette, Department of the Treasury
Gene Kuehneman, Retired
Sally Kwak, Joint Committee on Taxation
Allen Lerman, retired
Sean Lowry, Congressional Research Service
Nancy Lutz, National Science Foundation
Annie Mach, Congressional Research Service
Jamie McGuire, Joint Committee on Taxation
Thomas Miller, American Enterprise Institute
Anne Moore, Department of the Treasury
Rachel Moore, Joint Committee on Taxation
Edward Nannenhorn, Government Accountability Office
John Navratil, Joint Committee on Taxation
Andre R. Neveu, James Madison University
Daniel Newlon, American Economic Association
Ronald Promboin, retired
Zachary Richards, Joint Committee on Taxation
Alan Rozzi, Government Accountability Office
Karl Russo, Joint Committee on Taxation
Max Sawicky, Government Accountability Office
Maxim Shvedov, AARP
Anne Stevens, Government Accountability Office
Lori Stuntz, Ernst & Young, LLP
Kathleen Toma, Joint Committee on Taxation
Marvin Ward, Congressional Budget Office
Michael E. Weber, Internal Revenue Service
David Weiner, Congressional Budget Office
Elwood White, Government Accountability Office
Andrew Whitten, Department of the Treasury
Roberton Williams, The Urban Institute
James Wozny, Government Accountability Office
Jeffrey Wrase, Senate Finance Committee

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