tax watch, winter 2013

7/29/2019 Tax Watch, Winter 2013

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2/28Winter 2013

SAFF

Scot HodgePresiden

Richard BoreanCommunicaions Associae

Carer DeWitVice Presiden, Developmen

Scot DrenkardEconomis

Liz DunlapSenior Developmen Associae

Seven J. EninSenior Fellow

Joseph HenchmanVice Presiden,

Legal and Sae ProjecsDonald JohnsonPublicaions Manager

Nick KasprakProgrammer and Analys

Andrew LundeenGovernmen & CorporaeRelaions Associae

Elizabeh MalmEconomis

Will McBrideChie Economis

Richard MorrisonManager o Communicaions

Kyle PomerleauEconomis

Chris SaddockLaw Clerk

Michael SchuylerFellow

Michael VoglerDirecor o Governmen &Corporae Relaions

ax Wach (ISSN 1552-924X) is published

our imes per year by he ax Foundaion inWashingon, D.C., a nonpro, nonparisanresearch organizaion ha has moniored axpolicy a he ederal, sae, and local levels since1937.

Te ax Foundaion is a 501(c)(3) nonproorganizaion ha relies on ax-deducibleconribuions or suppor.

Please send correspondence o: Donald Johnson,Edior a ax Wach, Naional Press Building,529 14h Sree, N.W., Suie 420, Washingon,D.C. 20045.

Visi us on he web a www.axoundaion.orgor call (202) 464-6200.2013 ax Foundaion

As I reect on the Tax Foundations 75th anniversaIm reminded o what late Apple ounder Steve Jotold his biographer was his most important creatio

Was it the Macintosh? The iPhone? The iPad? No, Jobs sait was Apple the company. Making an enduring compawas both ar harder and more important than makingreat product.

Jobs was right. And that is why we are so grateul those who ounded the Tax Foundation in 1937 and buit into the premier research organization that it is tod

You wont fnd biographies o Fred Eldean, Charles Bauer, Herbert Miller,Alred Parker on the shelves. But each o the early executive directors o the TFoundation deserves credit or shaping the legacy o this enduring institution

They built the Tax Foundation on a rock solid oundation based on princiand act. The immutable principles o sound tax policyneutrality, simplici

transparency, stability, and economic growthstill guide our work today. But are also guided by acts and hard data, unlike so many groups in Washington tthrive on partisan rhetoric alone.

Weve tried our best to summarize some o the highlights o our past 75 yein this edition o Tax Watch. A lot o our publications have been preserved on owebsite, starting with the earliest studies rom 1940. Yet we still have a mounto publications to digitize and upload, a testament to our prolifc researchers.

Sadly, we dont know a lot about the people who worked at the Tax Foundatiover the years, since most o the personnel records were not kept. Few o the eapublications included the byline o the economists who wrote them; these wsimply Tax Foundation studies meant to stand on their own.

We do occasionally hear rom the Old Timers. Years ago I got a note ro

Gordon Paul Smith who landed his frst job out o graduate school in the m1940s as a junior analyst at the Tax Foundation. Like so many o our youscholars today, he cut his teeth working on the annual publication oFacts aFigures on Government Finance. Gordon said it was the Foundation who, withany doubt, truly set the course or my career in business and government esince. I am grateul. Always have been.

With Washington abuzz with speculation about the prospect o major reorm, we are already hard at work preparing to contribute to that debate. As late Nobel Laureate James M. Buchanan wrote us on our 65th Anniversary: TFoundation has continued to serve the indispensable unction o providing unased tax inormation. Keep up the good work. And, who knows, we may, onagain, someday get meaningul tax reorm.

Someday, Jim. Someday.

Sincerely,

Scott A. HodgePresident

MESSAGE FROM THE PRESIDENT


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WINTER 2013

The Tax Foundation is an independent, nonpartisan and nonproft research institution

ounded in 1937 to educate taxpayers, policymakers and the courts on sound tax policy.

Our economic and policy analysis is guided by undamental tax principles that should

serve as touchstones or sound tax policy everywhere.

2 Hisory o heax Foundaion

| Cener or Federal| Fiscal Policy6 Hisory o Federal ax Work a

he ax Foundaion

7

We Pu A Face on Americas axReurns

8 Raising Revenue: he Leas WorsOpions

11 axpayers Feel he Bie aerDeal on Fiscal Cli

| Cener or Sae| ax Reorm12 ax Foundaion Again Named

Organizaion o he Year13 Hisory o Sae ax Work a he

ax Foundaion

14 Sae-Local ax Burdens Average9.9 Percen

Lawmakers Look o StateBusiness Tax Climate IndexorReorm Guidance

| Cener or| Legal Reorm15 Deending axpayers and Pro-

Growh ax Law in he Cours

16 Curren Case: Proecingaxpayers Righs o Receive FullReunds o an Illegally Collecedax

Curren Case: ChallengingDrainage axes Disguised asFees

| Highlighs17 From he Archives:

A Pension Problem Predicion

18 Happy Birhday ax Foundaion!

19 Disinguished Service AwardRecipiens hrough he Years

20 Mee Our NewSa Members

21 Sephen Enin and MichaelSchuyler Join ax Foundaion

Enin & Schuyler Help Changehe erms o he ax Debae

| Media & Oureach22 2012 Media & Oureach Repor

23 A Hisory o he axFoundaions CommunicaionsProgram

| Gues Columnis24 Rep. David Camp (R-MI),

Chairman, House Commitee onWays and Means

IN THIS ISSUE

11

24


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5/28Winter 2013

be credited or helping to create themodern taxpayer movement.

The outbreak o World War IIcaused us to step up our research

on ederal government spendingpatterns, with a particular ocuson fnancing or wartime expendi-tures. While we acknowledged thathigher taxes were a necessary evilor unding a victory, we stressedthe importance o reining inunnecessary spending, partic-ularly superuous spendingundertaken under the guiseo war necessity. Not all TaxFoundation activity in the

1940s was wartime doomand gloom, as we opened ourfrst ofces in New York Cityat 30 Rockeeller Plaza. Fromhere, we would conduct ourimportant work until themove to Washington, DC in1978.

The 1940s also saw thedebut o a publication thatremains one o our mostsought-ater to this day: Facts

& Figures. Originally a source oinormation on government spend-ing and fnance, this publication isnow the go-to source or data onstate tax rates, collections, burdens,and more.

One interesting aspect o ourearly history is our employment owomen as analysts and economists.One o our frst emale researchers,Phoebe C. Main, came on board inthe early 1940s and was a prolifcwriter o Tax Foundation newslettersand reports. Ms. Main was joinedby several other emale proession-als at that time: Jo McBay, seniorresearcher; Mary Fernholz, statisti-cian; and Vera H. Knox, librarian.These pioneering women buckedmany o the accepted gender normso the 1940s and were the frst ina long line o emale researchers,

analysts, and economists at the TaxFoundation, a history o which weare exceedingly proud.

As the 1950s unolded, we began

the unenviable task o attacking themassive government spending andtaxing that remained rom wartime.Despite hopes to the contrary, thegovernment continued to grow at anenormous rate and our ocus settled

frmly on ederal tax and spendingissues. In an attempt to make clearto the American public how pow-erul the impact o tax policies atthe time was, we began calculatingthe Tax Bite in an 8-hour Day, asimple way o illustrating how longpeople have to work every day toulfll their tax liability. AnotherTax Foundation act-based illustra-tion entitled A Hundred Taxes on aLoaf of Bread captured the attentiono President Dwight Eisenhower,who quoted it extensively duringspeeches at the time. According toone observer, that simple illustra-tion aroused more consciousnessabout tax burdens than a thousandtables o statistics.

Not only did we spend the 1950seducating the general Americanpublic, but we also spent the time

aggressively interacting with law-makers on Capitol Hill in anattempt to push through tax andspending reorms. During this

decade, we were almost constantlybeore Congressional committeestestiying about sound tax policy.Our data was cited regularly byCongress and one particularthree-volume study, Can Federal

Expenditures Be Cut?, wascited by Senator Harry F.Byrd, Sr. o Virginia on oneo the nations frst non-entertainment telecastson an issue o national

importance.The 1960s and 1970s

saw a continuation o ouraggressive behind-the-scenes policy advocacywith legislators and poli-cymakers. The Kennedy taxproposal in 1962 promptedus to establish a Committeeon Federal Tax Policy thatwas charged with undertak-ing independent study o

the basic changes needed or ederaltax revision. This decade also saw usissue several lengthy reports criticiz-ing the Social Security system andits unding structure. Our reportswarned that Social Security wouldfnd itsel in fnancial distress ibetter unding and beneft strate-gies were not implemented. As thecurrent national discussion aboutSocial Security reorm indicates,these reports were incredibly (andunortunately) prescient.

By the end o the 1960s, ourmembership had risen sharply,along with our scholarly output.As we moved into the 1970s, wetruly developed our reputation asa nationally recognized source onon-partisan, common sense fscalinormation or the media, schools,policymakers, and general public.

One ineresing aspec o he

ax Foundaions hisory is is

early employmen o women as

analyss and economiss.


6/28Winter 20134

An exploding ederal defcit accom-panied by record-breaking spendingand rapid ination spurred greaterand greater interest in our work.

By the end o the 1970s, our mem-bership and scholarly output werelarger than ever; almost 400,000copies o publications were distrib-uted and we were cited over 1,000times in publications reaching over240 million readers worldwide.

In 1970, we issued reports warn-ing against the adoption o what

became the Alternative MinimumTax (AMT). Proposed to prevent asmall group o high-income taxpay-ers rom using so many deductionsand exemptions that they owed noincome tax, the AMT solved thisproblem not by paring back thedeductions but by layering a paralleltax system on top o the existing taxsystem. Our warnings stated thatthis was unnecessarily duplicativeand would ail to address the realproblem o a tax code packed withspecial interest provisions.

Tax Freedom Day, perhaps themost well-known Tax Foundationpublication, was deeded to us in1971 by its creator, Florida busi-nessman Dallas Hostetler. This

report shows how long into the yearit takes Americans to pay their com-bined ederal, state, and local taxburden.

While a boost in economicgrowth ollowed the 1964 Kennedy/Johnson tax cut, subsequentVietnam War-era tax increasesand 1970s stagation pushed taxburdens even higher. As tax andfscal policy became increasinglycentered in Washington, D.C., theTax Foundation moved there rom

New York City in 1978. The aimwas to bring our sta into closercontact with ederal policymakersand research resources. The movewas well-timed, as tax policy soontook center stage or a nation su-ering gasoline shortages, escalatingoil prices, burgeoning ination, andtight credit.

The Reagan tax cut signed intolaw in 1981 ushered in an eco-nomic boom; ederal revenues grewbut the economy grew even aster.Despite pressure on state and localtaxes ollowing taxpayer revolts likeProposition 13 in Caliornia, strongeconomic growth led to increasedtax collections. The 1986 tax reormoverhauled a system plagued with

special interest provisions, elimi-nating them or lower tax ratesacross the board. Throughout the1980s, we worked hard or policies

that would spur capital ormationavoid overspending, and reduce taxburdens.

Unortunately, 1989 saw the TaxFoundation experience a struggleo its own. As a result o execu-tive fnancial mismanagement, theTax Foundation ound itsel infnancial distress and in need o

restructuring. A loan rom Citizensor a Sound Economy allowed theFoundation to undertake the nec-essary restructuring and establisha solid fnancial ooting. By 1991under new management, we hadpaid o the loan and reestablishedoursel as the go-to source or reli-able, common sense, non-partisantax policy research.

The 1990s saw us broaden thescope o our research to issues whichwere not simply tax-code specifcbut were areas impacted generallyby tax and economic policies. Theseissues included international tradetelecommunications, legal issuesand a number o works on theunderlying philosophies o tax and


7/28Winter 2013

economic policies. By fnding new niches to explore,we broadened our appeal to a number o constituencieswhich previously had not approached us or inorma-tion. The 1990s also saw our work begin to include state

and local tax policies, marking a return to the subjectupon which we were originally created.As the Tax Foundation entered the new millennium,

we ound oursel once again at the top o the intel-lectual heap in Washington, sought ater or reliable,non-partisan tax and economics scholarship. The 2000swere an exciting time o growth. New economists andanalysts were employed to create what would becomeour current three centers: the Center or Federal Tax

Policy, the Center or State Tax Policy, and the Centeror Legal Reorm. To provide the best analysis to themost taxpayers and policymakers, we began producingwork in the three primary areas in which tax reormmust be undertaken: the ederal tax code, the state andmunicipal tax codes, and the courts.

The 2000s have seen the meteoric rise o the TaxFoundations state-ocused research and it is in this areathat we conduct some o our hardest hitting and mostpowerul scholarship. Through publications such asFacts & Figures: How Does Your State Compare?, the StateBusiness Tax Climate Index, and the annual State-LocalTax Burdens report, we have literally set the dialoguein many states on tax reorm. We also undertake indi-vidualized analyses o states in an eort to work withthe policymakers in those states to implement simple,neutral, transparent tax reorm.

Our Center or Legal Reorm has become a pow-erhouse in its own right, submitting bries in cases atall levels o the legal system, rom state courts to theUnited States Supreme Court. The Foundation submit-

ted a riend o the court brie in the U.S. Supreme CourtObamacare case and was one o the only organizationsto discuss the very issue that ended up deciding the case:whether the individual mandate was a tax or a penalty.

One o the most ortunate developments in recenthistory was the coming o Scott Hodge as our presi-dent in 2000. With 13 years at the helm, Scott is oneo our longest-serving presidents and has been, by ar,our most dynamic. Under his leadership, our work

has ourished, with the number o publications andmedia citations tripling. Scott was instrumental in thecreation o our three Centers, as well as the originalcreator o some o our most undamentally importantworks: Putting a Face on Americas Tax Returns, the StateBusiness Tax Climate Index, and our popular CompeteUSAcorporate tax reorm video series.

Over the last 75 years, the work o the Tax Foundationhas led us to be one o Americas most established andrelied-upon think tanks, working or simple, sensi-ble tax policy at the ederal, state, and local levels. Wedo this by inorming Americans about the size o taxburdens and providing economically principled analy-sis o tax policy issues.

It has been our pleasure to serve the taxpayers o theUnited States or these 75 years and we look orward tocontinuing this service into the distant uture.


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The history o the Tax Foundation is a record othe history o the national tax and fscal debatein this country. When we were ounded in 1937,

our work ocused almost exclusively on state and localtax and spending issues. It was not until the outbreako World War II that we began shiting our ocus toederal taxing and spending issues. We began laying theintellectual groundwork or post-war economic reorm.Our eorts ocused on areas where wasteul spendingcould be curtailed in order to ensure the most resources

or the war eort. As part o this eort, we debutedour Tax Facts & Figures on War Finance in 1942, whichkept the American people, and policymakers, inormedabout the levels o wartime spending.

Unortunately, ater the war ended, spending andtaxing did not. The nation had become accustomed tolarge-scale government spending and defcits and ourwork became almost exclusively ocused on ederalissues in an attempt to drive national tax and spendingpolicies back into the realm o the sensible and sus-tainable. We began to raise the alarm about Americancompetitiveness in the global market in the 1950s as

corporate tax rates grew ever higher, a warning wecontinue to issue to this day. By the time we enteredthe 1960s, we had become a leading voice on CapitolHill or sound tax policy. Tax Foundation sta couldbe ound in congressional hearings testiying or taxreorm and in the media inorming the public aboutthe impact o poor tax and spending policies on theaverage American amily.

Our work at the ederal level was acknowledged bynot one but three presidents o the United States in 1962,on the occasion o our 25th anniversary. PresidentsHoover, Eisenhower, and Kennedy sent us letters thank-ing us or our work on behal o the American peopleand encouraging our continued eorts. PresidentKennedy said, The [Tax] Foundations distinguishedrecord o accomplishment should be a source o prideto its members, who deserve the thanks o all our citi-zens or their dedication to a task which contributes

so much to the eective unctioning o the Americandemocratic system.

In 1970, we warned against the adoption o what isnow known as the Alternative Minimum Tax. 1971 sawthe debut o perhaps our most amous publication, TaxFreedom Day, showing how long into the year it takesAmericans to pay their combined ederal, state, andlocal tax burden. Work like this continued to propel usinto position as an organization which could be trustedor reliable, non-partisan data presented in a common

sense way. Our move to Washington, DC in 1978allowed us to be closer to the action and strenghtenedour ability to inuence the debate on Capitol Hill overthe nations fscal policies.

The Reagan tax cut signed into law in 1981 ush-ered in an economic boom, while the 1986 tax reormeliminated special interest provisions in the tax codeand lowered tax rates across the board. These develop-ments energized our work and we pushed even harderor policies that would spur capital ormation, avoidoverspending, and reduce tax burdens.

More recent history has seen the debut o our

groundbreaking research on who bears the cost ogovernment. Our fscal incidence research, publishedin 2007, compared how much households at dierentincome levels received in total government spending(ederal, state, and local) to the total amount o taxesthey paid at all levels. We continue to conduct researchthat shows an increasingly smaller group o taxpayersbearing an ever-greater share o the cost o government.

Today, our Center or Federal Tax Policy producesand promotes timely and high-quality data, research,and analysis on ederal tax issues that inuences thedebate toward economically principled policies. Ourexperts are routinely relied upon or presentations,legislative testimony, and media appearances on indi-vidual and corporate tax issues. The centers webpageis a comprehensive resource or taxpayers, journalists,lawmakers and their sta.

Winter 20136

Center for Federal Fiscal Policy

Hisory o Federal ax Worka he ax Foundaion


9/28Winter 2013


We Pu a Face onAmericas ax Reurns

by Scott Hodge

Inequality has been at theoreront o the nationspolitical discourse over the

last couple years thanks to anumber o published reportspurporting to show the richgetting richer while the resto America is stuck in neutral.

Indeed, one report suggested that Americans have not

been this unequal since the Great Depression in 1929.Spurred by this news, support has been growing in

both Washington and among the public to raise taxrates on the rich to reduce inequality in America.Indeed, many believe that the tax policies enacted in2001 and 2003which lowered marginal tax rates orall taxpayersare a root cause o todays inequality.Thereore, critics conclude, raising tax rates on high-income Americans will halt the growth o inequality.

We created this book to show that much o theperceived rise in inequality is really the result o thebusiness cycle combined with social and demographic

changes ar beyond the role o tax policy. Indeed, thereis no evidence o a long-term trend in inequality overthe last twenty years, only wide swings up and down.

Thanks to misdirected tax policy, America is becom-ing divided between a shrinking group o taxpayers whoare bearing the lions share o the cost o governmenttoday and a growing group o taxpayers who are discon-nected rom the basic cost o government.

With this book, we seek to put a ace on the ever-changing demographics o American taxpayers. Theailure to understand these changes has produced poortax policy and threatens to undermine eorts to over-haul the tax code.

Since it was published in October o 2012, approxi-mately 4,000 copies oPutting a Face on Americas TaxReturns: A Chart Book have been distributed. Over 500were sent to people who purchased additional copiesater being impressed with the book, including leaderso citizen economic study groups and accountants whodecided to include the book in the fnancial packets orall o their clients at the end o the year.


10/28Winter 20138


Raising Revenue:Te Leas WorsOpionsBy Scott Hodge

T

he nation barely survived the fscal

cli, but the problems surrounding

the budget, the debt, and the tax

system remain unresolved. As the nation

conronts the need to address these

issues, the specter o revenue will likely

rear its head again. Lawmakers must keep

in mind that not all revenue raisers are

equal. Some will have ar more harmul

economic consequences than others.

Based on OECD research that estab-lished which taxes are most and least

harmul or long-term economic growth,

we put together a non-comprehensive,

ranked list o strategies to raise revenue

while doing the least damage to economic

growth.

These strategies, rom least harmul to

most harmul, are:

Least HarmulEconomicgrowth

This may seem obvious, but whetheror not we have enough new economicgrowth to generate more revenues orthe Treasury is directly dependent uponsome o the policy choices listed below.

#1

Asset Sales

The U.S. ederal government ownshundreds o billions worth o assetsthat it can, and should, sell o in orderto pay down the national debt. Thebiggest beneft o asset sales is turningtax-subsidized enterprises into tax-generating ones.

#2

As a second-best option to assetsales, require Government SponsoredEnterprises (GSEs) and ederally-ownedbusinesses to pay ederal income taxes.


11/28Winter 2013


User ees and leases

Lawmakers could raise billions with noharm to the economy by raising userees or many o the goods and servicesthe government provides (such as ood

insurance, inland waterways, NationalParks, and loan originations) andopening up more public lands or oiland mineral leasing.

#3

Tax certain non-taxed

business activities

There are a number o non-taxedbusinesses or industries that competedirectly with private businesses but havethe advantage o not paying ederalincome taxes. These include: creditunions; rural electric coops; nonprofthospitals; and certain types o insurancefrms. These businesses should be taxedas any or-proft enterprise.

#4

#5 Premium and co-payincreases

Increasing Medicare premiums and

co-payments are not likely to bepolitically popular, but asking seniorsto contribute more toward their ederalhealth insurance would be ar lessharmul to the economy than a broad-based income tax. Even i these policieswere means-tested, they might actuallyadd a measure o market orces into asystem that has ew.

#6Federal Employee

ContributionsAs most private employers are nowdoing, the ederal government shouldask ederal employees to contributemore to their own health care andretirement costs. Currently, ederalemployees pay 25 percent o the costso a basic health plan (some pay moreor more expensive plans). This shareshould be increased to at least 30 to 35percent.

#7 Sales/Excise TaxesIncreasing current excises or creatinga new one would not be costless, butless so compared to higher incometaxes. For example, according to CBO,

increasing the ederal gas tax by 25cents could raise about $30 billion peryear.

Base-broadening

This is a tricky one because whileeveryone talks about broadening thetax base and eliminating spendingin the tax code, the truth is that notall tax preerences are created equal

(see discussion about untouchables,below). From an economic perspective,eliminating tax preerences producesless harm than increasing marginal taxrates, but caution is also in order.

Eliminate industry subsidies,targeted tax preerences, andreundable credits frst

Tax employer-provided health carebenefts

Restore PEP and Pease

Cap deductions

Untouchables: For individuals, donot eliminate or scale back broad-based savings vehicles such as401ks, Roth IRAs, or investmentincentives such as the reduced rateson dividends and capital gains.For businesses, do not lengthendepreciation schedules, eliminatebusiness expensing or depletion, oreliminate deerral. These provisions

oset double taxation and move thetax system toward a consumptionbase.

#8


12/28Winter 20130


Raising the Payroll Tax Rate

and / or Raising the Wage

Base to Which it Applies

Because it applies to wages only, and

the Social Security portion applies onlyto the frst $110,000 in wages, thepayroll tax has little impact on saving,investing, entrepreneurship, and high-productivity labor.

#9

#10 Raising the AlternativeMinimum Tax and/or a

Bufet Rule-type minimum

taxMinimum taxes merely complicatethe code, introduce uncertainty ortaxpayers, and invite special interests tolobby or exemptions. In the end, theyraise little revenue.

#11 Allowing temporaryexpensing to expire

Full expensing on a permanent basiswould permanently shit investmentorward, leading to permanentlyincreased production and income.Making ull expensing permanent couldboost GDP by more than 2.7 percentover the long run, while 50 percentexpensing could boost GDP by 1.36percent.

#12Raising top individual

income tax rates

Increasing the marginal tax rates in thetop two tax brackets rom 33 percentto 36 percent and rom 35 percent to39.6 percent would lower long-termeconomic growth by 0.44 percent. Ourmodel also shows that or every $1 sucha policy would raise or the treasury,GDP would all by 2.77 percent. Thatsa poor tradeo.

Raising the Tax Rate on

Estates

This ranks worse than raising topindividual rates because it is a revenueloser not a revenue gainer. PresidentObamas budget proposed increasingthe ederal estate tax rom the current35 percent top rate with a $5 millionexempt amount to the 2009 levels o a45 percent top rate and a $3.5 millionexempt amount. This policy wouldlower GDP by 0.23 percent. While thismay seem like a small eect, the lossin GDP is nearly fve times the amounto new tax revenue gained rom thispolicy.

#13

Raising tax rates on capital

gains and dividends

Increasing the capital gains top rateto 20 percent and letting the tax rateon dividends revert to 39.6 percent orpeople in the top two brackets wouldlower GDP by 2.15 percent and wouldnot raise any new tax revenues becauseo its depressive eects.

#14

Most Harmul

Raising corporate income tax rates.#15


13/28Winter 2013


On January 3, 2013, President Obama signed intolaw legislation designed to avert the fscal cli.Among many things, the deal

Made permanent the 10 percent, 15 percent,25 percent, and 28 percent income tax bracketsrom the Bush tax cuts, while retaining the 33percent and 35 percent brackets or taxableincome under $400,000 (single) and $450,000(joint flers). The deal imposed a 39.6 percent taxrate on income above this level

Phased out personal exemptions (PEP) andlimited itemized deductions (Pease) or oradjusted gross income over $250,000 (single)and $300,000 (joint flers)

Set the capital gains tax and dividend tax at 20percent or taxpayers with income over $400,000(single) and $450,000 (joint flers)

Permanently patched the AMT

Raised estate and git taxes to 40 percent, butabove the current exemption level (~$5.12million) and adjusted or ination in uture years

Ended the 2 percent payroll tax cut

While the fscal cli deal debate ocused on howmuch higher taxes on wealthy Americans would be, andcontained many provisions aecting various parts o

the tax code, it is the expiration o the payroll tax holi-day that will be elt most acutely by most Americans.

The payroll tax holiday was enacted in 2011, reduc-ing the employee share o the Social Security payroll taxrom 6.2 percent to 4.2 percent (appearing on manypaystubs as FICA, OASDI, or Social Security). Becausethis tax holiday was not renewed in the fscal cli deal,most Americans are now seeing a 2 percent cut in theirpay.

The payroll tax holiday reduced revenues dedicatedto Social Security by $10 billion per month, so whilepopular it was also costly. U.S. payroll taxes also undsome o our largest entitlement programs, so reducingthem potentially aggravated the long-term solvency oSocial Security. Proponents o the holiday argued thatit boosted spending, but experts debate whether suchshort-term stimulus is eective. The holiday alsomeant larger ederal government borrowing at a time orecord defcits.

axpayers Feelhe Bie aerDeal on Fiscal

Cli


14/28

Te oundaionis once again Sae ax

Noes Organizaion ohe Year because i is aconsan and reliablesource o daa, sudieand oher fscal

inormaion. Sae ax No

2 Winter 2013

Center for State Tax Reform

Tax Foundation AgainNamed Organizationof the Yearby Richard Morrison

Industry journal State Tax Notes has again namedthe Tax Foundation as Organization o the Year orthe second year in a row. The award recognizes the

Tax Foundations reputation as the group most widelyrelied upon by practitioners, researchers, and the newsmedia as a source o inormation on state tax issues.

We are honored and humbled by being named

Organization o the Year or a second year in a row,said Tax Foundation Vice President or Legal & StateProjects Joseph Henchman. This award is a testamentto all o the work done not only by our state team, butto everyone at the organization. Were especially excitedto be receiving this recognition during our 75th anni-versary year.

In their award citation, State Tax Notes praised theTax Foundations fagship publications, including theguidebook Facts & Figures and the State Business TaxClimate Index, which synthesizes over a hundredmetrics to measure the business-riendliness

each states tax system. Citing the infu-ence o the Index, they note that thereis no question that the Tax Foundationis infuential in shaping the state taxreorm debate.

Award recipients are selected based oninterviews, polling, and analysis by theeditorial sta oState Tax Notes. In 2011, inaddition to being named Organization o theYear, the Tax Foundations Joseph Henchman wasnamed one o the Top 10 Most Infuential People inState Tax Policy.

State Tax Notes, a publication o Tax Analysts,is a leading source or multistate tax news and iswidely read by tax practitioners across the coun-try. Tax Analysts also publishes Tax Notes and TaxNotes International, among other titles.

Credi: Bruce McAdam, Flickr


15/28Winter 2013


Hisory o Sae ax Work a heax Foundaion

We were ounded in 1937 as a grassroots organi-zation ocused almost exclusively on state andlocal tax issues. Even though ederal tax col-

lections exceeded local collections or the frst time in1937 and the ederal government had begun to growlarger than ever beore, it was tax policy at the state andlocal level that most concerned activists.

This was particularly evident soon ater our ound-ing when the Westchester County, New York Board oSupervisors proposed an increase in taxes. The newly-established Tax Foundation sent sta up to New York to

educate the taxpayers association on sound policy andadvocacy. As a result o our work, the tax increase wasdeeated. Soon ater, we helped taxpayer associationsthroughout New York organize action in Albany againsta state budget increase; again, our mission was success-ul and the state budget was cut $25 million below theprevious year.

Ater starting as a grassroots organization, theounding sta realized our better value was to serveas a national resource or research and data or stateand local organizations. We barnstormed the coun-try setting up state and local taxpayers associations

and public expenditure councils, using our nationalorganization as a clearinghouse to provide them data,analysis, and direction. In this, we were incredibly suc-cessul. As our executive director in 1940, Fred Eldean,put it: it is sel-evident that action by citizen groups...should always be based on an intelligent command othe acts.... Research must be combined with constantvigilance. We continue to work closely with many othese national taxpayers conerence (NTC) organiza-tions today.

Through our eorts to educate and provide scholarlyresources and reliable data to the state associations, wewere able to set the dialogue at the state and local levelwith regard to tax and spending reorm. By 1941, oureorts at the state and local level had produced sav-ings (through combating poor tax policy and wasteulgovernment spending) o over $95 million in 12 statesand 48 cities and counties. This was no small amounto money in 1941 and no small accomplishment or thevery young Tax Foundation.

The war years, however, saw us begin shiting ourocus to ederal taxing and spending issues. Federal

issues remained the ocus o the Tax Foundations work,exclusively or most o the time, until the early 1990s.At this time, interest in state and local tax issues beganto rise again within the Tax Foundation.

In 2004, to rekindle this element o our work, weset up our Center or State Tax Policy. Our scholars andanalysts prepare annual studies calculating state taxburdens and ranking the business-riendliness o statetax structures. These State-Local Tax Burdens and StateBusiness Tax Climate Index ranking reports have consid-erable impact on state policymakers, tapping into their

competitive instincts. These rankings, bundled in ourreormulated Facts & Figures booklet, reach every statelegislator and continue to spur positive developments instate tax policy.

As we approach the tenth anniversary o the TaxFoundations reconstituted state policy program, thereare a number o astonishing successes to tally. Oureorts have directly contributed to enacted positive taxchanges, some major, in Indiana, Iowa, Kansas, Maine,Michigan, Rhode Island, Virginia, and Washington.We helped blunt or weaken damaging proposals inCaliornia, Illinois, Maryland, Nevada, and New York.

Our rankings have been cited in governors state othe state addresses in ourteen states in the past threeyears and perhaps most importantly, legislators on bothsides o the aisle use us as their resource or reliable taxdata, research, and analysis. As State Tax Notes ound inour 2011 award citation, even the most ardently lib-eral legislator acknowledged, oten grudgingly, that theoundation was generally right in its approach to taxpolicy.

In a recent survey we conducted, 70 percent o state-based think tanks and taxpayers associations say theyrequently use our research in their state, and whenasked to describe our work, the vast majority o theseorganizations used words such as timely, reliable, help-ful, and high-quality. Respondents particularly praisedour Location Matters book and our recent work on sugarand snack taxes, estate taxes, and flm tax credits.

As the only organization providing a national per-spective on 50 unique tax systems, our state teameconomists and analysts will continue to barmstormthe country to present our fndings and meet with of-cials to make the case or simple, sensible tax policy.


16/284 Winter 2013


Sae-Local ax Burdens Average 9.9 Percenby Elizabeth Malm

For nearly two decades, we have calculated state and local tax burdens to draw theattention o taxpayers and policymakers to the amount o income that goes to stateand local governments each year.

New York residents paid the most at 12.8 percent o income. Next on the list areNew Jersey (12.4 percent), Connecticut (12.3 percent), Caliornia (11.2 percent), andWisconsin (11.1 percent). Alaskans had the lowest tax burden at 7.0 percent. The nextlowest states were South Dakota (7.6 percent), Tennessee (7.7 percent), Louisiana (7.8percent), and Wyoming (7.8 percent).

Our methodology, unlike other measures, adjusts or the cross-border reach that sometaxes have. For example, Alaska exports much o its tax burden by placing hety taxes onoil extraction, a tax that is paid by taxpayers in other states when they fll up at the pump

Despite collecting large amounts o revenue, Alaska residents actually have the countrys lowest tax burden.With this report, we encourage taxpayers to examine states around the country with lower burdens and ask the

question Am I getting something more or the additional tax burden?

Read this years Burdens report at http://taxfoundation.org/article/

annual-state-local-tax-burden-ranking-2010-new-york-citizens-pay-most-alaska-least

Lawmakers Look o State Business TaxClimate Indexor Reorm Guidanceby Scott Drenkard & Joseph Henchman

Our annual State Business Tax Climate Index was released in October to a urry o media attention and recogntion. The report, which uses over 100 variables to evaluate whether state tax structures are pro-growth, servas a guiding document or states aiming to make positive corporate tax reorm.

One o the biggest stories this year was Michigans positive reorm in their corporate code. The state eliminateits distortionary Michigan Business Tax that was littered with special credits and replaced it with a at, simple, percent corporate income tax. This monumental tax change, which subjects business in the state to a more leveneutral tax code, improved Michigans corporate score rom 49th in the country last year all the way to 7th.

Policymakers rely on this hety 56-page report. Seven governors issued statements about it shortly ater irelease. Governor LePage o Maine took the occasion o the Index release to call or cuts in the Maines corporatcode. An aide to Governor Andrew Cuomo o New York even sparred publically about our results (New York rankdead last), saying the report shouldnt be trusted. Media outlets, including the New York Times and New York Posjumped to our deense, praising the report and noting that Cuomo had cited the Index results in his State o thState address the year beore.

Read the 2013 Index at http://taxfoundation.org/article/2013-state-business-tax-climate-index


17/28Winter 2013

Center for Legal Reform

Deending axpayers and Pro-Growh axLaw in he Cours

While we at the Tax Foundation have spentdecades analyzing ederal tax policy and pres-suring or better state tax policy, our Center or

Legal Reorm is a young creation. It arose ater a 2004ederal court decision on a targeted incentive packagethat ruled that it was unconstitutional or states tocompete on tax policy.

Were good ederalists at the Tax Foundation, frmbelievers in Justice Louis Brandeiss description o thestates as the laboratories o democracy. Targeted taxincentive packages may be bad policy, and we say so re-

quently, but they dont violate the U.S. Constitution.Our sta attorney fled two bries with the U.S. SupremeCourt, successully asking them to take the case andthen successully getting them to reverse the ederalcourt decision unanimously.

Lawyers in other cases fghting bad tax policy likedour work and sought our help, and we quickly beganfling bries in other cases. We realized that judges playan important role in developing tax policy, by interpret-ing tax codes, applying sections in individual cases, anddealing with circumstances unoreseen when legislationwas drated. By explaining complex tax legal reorm

issues, we can encourage judicial and policy decisionsthat protect taxpayers and promote sensible tax policy.

Probably the biggest area o our legal program isworking to defne the scope o state tax power. Statesare eager to export their tax burdens to out-o-statecompanies, business travelers, and tourists. The courtsare reluctant to inringe on states sovereign tax power,but they will do so i a states purpose is to discriminateagainst non-residents.

Weve helped a number o taxpayers prevail againstan overreaching state revenue department, including ataxpayer who got a $180,000 tax bill ater visiting a stateor one day and an athletes mother who aced a dozenstates wanting to divvy up taxes on a small sports prize.Our experts routinely testiy to Congress and speak tothe media on these important issues, and our researchreports are widely cited.

Right now, were active in explaining proposed billsthat would stop states rom demanding income taxrom business travelers unless they are in the state or

at least 30 days (many states demand withholding romday one), that would limit taxation o out-o-state busi-nesses with no physical presence, and that would limitdiscriminatory taxation o consumer services.

Other victories include striking down an impactee in Hamilton, Ohio that was really a tax, strik-ing down a tax payment processing ee in San Diegoas really a tax on a tax, striking down an illegal salestax district in northern Virginia, winning the right tochallenge property tax assessment methods in Georgia,preventing a judicial takeover o education fnancing inIndiana, and requiring Los Angeles to allow taxpayers

to fle reund claims to get back an illegally collectedtelephone tax.

Learn more about the Tax Foundations Center for

Legal Reform at http://taxfoundation.org/tax-topics/

center-legal-reform.


18/28

Curren Case: Proecing axpayers Righs oReceive Full Reunds o an Illegally Collecedax

On December 17, we fled a brie with the Caliornia Supreme Court involving the Long Beach, Caliorniatelephone tax, which was allegedly unconstitutionally collected or the period 1979 to 2006. Caliornia lawestablishes a procedure or taxpayers to fle a group reund claim, known as a class claim, an efcient process

that reduces costs. Long Beach, however, claims it is not bound by the state law, and instead requires taxpayers tofle separate reund claims. The trial court in this case ruled in avor o Long Beach, and the Caliornia SupremeCourt has agreed to hear the appeal.

I Long Beach wins, the practical eect will be that the City will keep most o its illegally collected revenuebecause it is unlikely all past taxpayers will individually pursue reund claims.

We support this option o fling class reund claims because it osters government accountability and subjectsstate and local revenue agencies to a air and transparent reund processes. Caliornia chose to give consumers oneprocess, providing a air and open standard. Large suits make courts accessible or groups o consumers with smalindividual claims. By challenging Long Beachs attempt to avoid recognizing this claim, we hope to send a messagethat governments should not reuse to provide ull reunds o illegally collected taxes.

The case, McWilliams v. City of Long Beach, No. S202037, is pending beore the Caliornia Supreme Court. Ourbrie is a joint submission by the Tax Foundation, Consumer Action, and the National Association o Shareholderand Consumer Attorneys (NASCAT).

Curren Case: Challenging Drainage axesDisguised as Fees

In January 2013, we fled a brie in a lawsuit involving the city o Ocean Shores, Washington, and their assess-ment o a stormwater charge on all real estate lots in the city. The ee is based on property square ootageeven though stormwater management is a general public service and the charge is not based on the use o drain-

age acilities or other measures o beneft and burden. The jury was instructed as to the defnition o taxes and eesproperly except to deny that a ee involves a particularized beneft, and consequently concluded that the charge isa valid ee. Banks has appealed. Our brie recited the proper defnition o ee and warned against permitting citiesto impose taxes disguised as ees. Attorneys or the city urged the court not to consider our argument but theirobjection was overruled.

6 Winter 2013

Center for Legal Reform


19/28Winter 2013

Highlights

In 1976, the Tax Foundation issued Research Publication No. 33, Employee PensionSystems in State and Local Government. This publication was one o the frst to criti-cally analyze public pension systems in the United States, as well as the fnancial

practices surrounding those systems. Using both general research and specifc stateand local case studies, we concluded that current unding practices in many publicpension systems were cause or serious concern. Increasingly generous beneft pro-visions that ar outpaced input increase ormulas were setting both state and localpension systems on the road to ruin. We concluded about local pension systems:

Cerain o he naions major ciies will be aced wih serious uureroubles in meeing paymens unless here are basic changes inlevels o unding, benef levels, or boh.

As o 2012, over thirty cities and counties have declared Chapter 9 bankruptcy,in no small part due to massive pension obligations that could not be met. Stateslike Illinois and Rhode Island have pension systems which are less than fty percentunded, while only sixteen states have pension systems which are over eighty percentunded.

When the Tax Foundation issued Research Publication No. 33 in 1976, it stood likeCassandra upon the walls o Troy, heard but disbelieved or disregarded. We know nowthat this publication was prescient and could have saved many state and local govern-ments a great deal o fnancial trouble. To help urther the dialogue on public pensionreorm, Tax Foundation Research Publication No. 33, Employee Pension Systems inState and Local Government, will be digitized and reissued in early 2013.

From he Archives:A Pension Problem

Predicionby Donald Johnson


20/28

Happy Birhday ax Foundaion!

Winter 20138

Highlights

2012 marked a special year or he ax Foundaion.

I was our 75h birhday, our diamond anniversary.

o celebrae his auspicious milesone we hosed a

recepion in April on Capiol Hill and an open house

in our ofce on our ofcial December 5h birhday.

Te recepion was held in he Russell Senae

Building and i coincided no only wih he deadline

or ling ederal income axes bu also wih 2012s ax

Freedom Day. We invied legislaors, congressional

saers, and supporers in he area o drop by and

help us commemorae he special day wih a birhday

cake.

Is no oen a nonpro group achieves his lon-

geviy and his much success!

(l-r) Rep. Marsha Blackburn (R-N), Rep. om Peri (R-WI), and

Scot Hodge, Presiden o ax Foundaion, cha a our anniversary

recepion on Capiol Hill.


21/28Winter 2013

Highlights

Te Highligh o heax Foundaions

Annual Dinner

S

ince 1941 weve honored those titans in the feld,

rom both the public and private sectors, who haveworked steadily to advance principled tax policy.

We present to these individuals the DistinguishedService Award at our Annual Dinner, aectionatelynicknamed Tax Prom. It is a widely attended eventdrawing a signifcant number o key congressionalmembers and staers, government ofcials, corporateexecutives, and tax proessionals.

For many years, when we were headquarteredin New York City, the ceremonies were held at theWaldor Astoria on Park Avenue. When we relocatedto our nations capital, the gala shited to the elegantgrand dame, the Mayower Renaissance, also known asWashingtons second best address.

Those that have received the award are an impressiveand elite group representing a Whos Who in govern-ment, academia, and industry. Importantly, politicalparties were never an issue in the decision process andrecipients have included Republicans and Democratsalike.

At the frst awards ceremony in 1941 there werethree recipients: Senator Harry Byrd o Virginia; HarryWriston, president o Brown University; and George

Benson, president o Harding College. Both Wriston

and Byrd went on to receive the award multiple timesthroughout their careers as have a small number oother recipients. Especially noteworthy is the act thatSenator Bryds eldest son, Senator Harry Byrd, Jr., wonthe award himsel in 1973, thirty two years ater hisather. Harry Byrd, Jr. attended the Dinner or 49 yearsin a row and is still a supporter o the Tax Foundation.

Past award winners include Speaker o the HouseJohn A. Boehner, Senate Finance Committee ChairmanMax Baucus (D-MT), Eli Lilly Chairman and CEOSidney Taurel, House Ways and Means CommitteeChairman Bill Thomas (R-CA), ormer TreasurySecretary James A. Baker III, Federal Reserve Chairman

Paul Volcker, National Taxpayer Advocate Nina Olsen,ormer Secretary o Deense Casper Weinberger, ormerChairman o the Federal Reserve Alan Greenspan,Senator Patrick Moynihan, Rep. Dick Armey, Rep. PaulRyan, President George W. Bush, President Dwight D.Eisenhower, and President Herbert Hoover.

In 2012 we honored Rep. David Camp, Chairman,House Committee on Ways and Means and, or the frsttime, a representative o journalism excellence, The WallStreet Journal Editorial Page. The Wall Street Journalsaward was accepted by Dan Henninger, deputy editor.

DisinguishedService Award

Recipienshrough he

Years

(l-r) Rep. David Camp, Chairman o he Commitee on Ways and Means

acceps he award rom he Honorable Bill Archer, a ax Foundaion

Board o Direcors member. Bill was honored as a Disinguished Service

Award Recipien wice by he ax Foundaion during his enure as a

represenaive rom exas.

(l-r) Douglas Holz-Eakin, Presiden o American Acion Forum, sixh

Direcor o he CBO and ax Foundaion Board o Direcors member,

presens he award o Dan Henninger, Depuy Edior o he Wall Sre

Journal.


22/28

Fall 2012 Interns

Julia MorrissJulia was a policy intern or the all o 2012 and was aparticipant in the Charles G. Koch Internship Program.She is currently pursuing a bachelors degree in Law andSociety at American University. In the summer o 2012she worked as a government aairs intern at the CatoInstitute where she also researched international taxand budget policy. Her analysis o tax and fscal policyhas been eatured in the Daily Caller.

Ben SutsBen was a policy intern or the all o 2012. He is cur-rently pursuing a masters degree in Applied Economicsat Georgetown University. He holds a bachelors degreein Economics and Politics rom Washington and LeeUniversity and a masters degree in Public Policy romJohns Hopkins University. Ben help conduct research orour new book on North Carolina tax reorm options.

Winter 201320

Highlights

Meet Our New Staf Members

Elizabeth Malm

Elizabeth has joined us an Economist or the Center or State Tax Policyat the Tax Foundation. She holds a B.S in Economics and B.A. in Historyrom the University o Wyoming, and holds an M.A. in Economics romDuke University. During her tenure at Duke, her research interests includedapplied microeconomics, mechanism design, and competitive pricing inhealth insurance markets. Liz also interned or the Wyoming TaxpayersAssociation where she contributed to the Wyoming Tax Roundup quarterlypublication on topics such as state mineral trust unds, education andretirement fnancing, and the eect o healthcare reorm on state fnance.

Liz is the co-author o theAnnual State-Local Tax Burden Rankingreport

Her work has appeared in fve states and over twenty news publications. Outlets such as Yahoo! News, MSNBCNews, the Hill, the Advocate, the Dayton Daily News, Democratand Chronicle, and the International Business Timeshave sought out her work on State-Local Tax Burden Ranking, gambling taxes, and flm tax credits.

Chris Saddock

Chris Saddock is a Tax Advisor and Tax policy analyst who serves as theTax Foundations Law Clerk. Chris holds a B.A. in Communication romthe University o Texas at Austin and a Business minor. He also holds aJ.D. rom Southern Methodist University and is currently working towardshis LL.M. in Taxation at the Georgetown University Law Center. Chris has

served as a Tax Advisor or high net worth individuals or the past ouryears, providing tax assistance and advice on matters related to state andlocal taxation, ederal git and estate taxation and ederal income taxationor individuals and business entities.

Chris is interested in drating tax policy opinions and amicus briesrelated to ederal and state policy issues. In particular he has worked on the appropriate nexus standards or statesales tax, the implications o the new international FATCA tax regime, and explaining changes arising rom theAmerican Taxpayer Relie Act o 2013. Chris has also been actively involved in legal work to fnd and seize theproceeds o human trafcking. He hopes to utilize his studies at Georgetown to develop an innovative inormationreporting and asset seizure mechanism to help combat this crime.


23/28

I pro-growth tax reorm is to be a reality, the reorm movement must have the capability to drive thedebate with our own credible, nonpartisan research and modeling techniques. These techniques mustbe based on real-world models o the economy and individual responses to tax policy.

In 2013, the Tax Foundation will launch a multi-year project to build and deploy the economic modelsneeded to support the empirical case or tax reorms that promote long-term economic growth.

The project is already starting out with a solid oundation. Now that weve been joined by StephenEntin and Michael Schuyler, we are the only organization in Washington using a tax simulation modelin conjunction with a Neoclassical Growth Model to measure the long-term impact o tax changes oneconomic growth. These dynamic models were developed over the past fve years by ormer Treasury econ-omist Gary Robbins and Stephen Entin.

The overarching goal o this project is to change the terms o the tax reorm debate away rom redistri-bution to economic growth.

Winter 2013

Highlights

Sephen Enin and MichaelSchuyler

Join ax Foundaion

In October 2012 theTax Foundation wasdelighted to add

economists StephenEntin and MichaelSchuyler to its ederalpolicy team. Entin andSchuyler were bothpreviously with theInstitute or Researchon the Economics o

Taxation (IRET), a pro-ree market economic

policy organization based in Washington, D.C.Were thrilled to have two such distinguished econ-

omists joining us, said Tax Foundation President ScottHodge. Steve and Mike bring extremely impressiveaccomplishments to the tax policy debate, includingexperience in academia, government service, and thethink tank world.

Stephen J. Entin is a Senior Fellow at the TaxFoundation. Previously, he was President and ExecutiveDirector at the Institute or Research on the Economics

o Taxation. He is a ormer Deputy Assistant Secretary

or Economic Policy at the Department o the Treasuryand advisor to the National Commission on EconomicGrowth and Tax Reorm (the Kemp Commission). Priorto joining Treasury, Mr. Entin was a sta economistwith the Joint Economic Committee o the Congress,where he developed legislation or tax rate reductionand incentives to encourage saving. Mr. Entin is a grad-uate o Dartmouth College and received his graduatetraining in economics at the University o Chicago.

Dr. Michael A. Schuyler is a Fellow at the TaxFoundation. Previously, he was a Senior Economist

at the Institute or Research on the Economics oTaxation. He is the author o numerous economic anal-yses in which he has addressed a wide range o tax andregulatory issues, particularly concentrating on howgovernment policies alter incentives and how incen-tives aect economic choices. Among his publicationsare studies on the impact o government mandates onthe health insurance market, income-based phase-outprovisions in the tax code, and the national debt. Dr.Schuyler received his Ph.D. in economics rom theUniversity o Maryland, where he has taught courses onmacroeconomics and money and banking.

Enin & Schuyler Help Change he erms o he ax Debae


24/28Winter 201322

Media & Outreach


25/28Winter 2013

Media & Outreach

A Hisory o he ax FoundaionsCommunicaions Program

by Richard Borean

To understand the evolution o the Tax Foundationscommunications program is to appreciate theimpact o technology on the communications

world as a whole. Having existed or three-quarterso a century, we have adapted to many technologicaland societal changes. Whereas newspapers, daily radiobroadcasts, and evening news programs in the 30s, 40s,and 50s updated Americans on the latest issues, today,24 hour news networks and constant internet accessallow people to gather inormation on stories beore the

dust even settles.During our ormative years ater our inception

in 1937, print media was the predominant means oinormation distribution. Between 1944 and 1945, theamount o literature distributed by the Tax Foundationdoubled to nearly 1.3 million pieces. Our materialbegan to appear in paid advertising; at least one bankused our cartoons in a paid ad, and the Cleveland pressused extensive visual material in what the advertisingdepartment described as a series o ads to stimulateinterest o the general public in the tax question and tomove him to do something about it through his elected

representatives. In 1958, our material was used inGeneral Electrics economics course or its employees,entitled Corporate Problems in the National Economy.Our ocuses on business employee education, as wellour dedication to national coverage, provided us with adiverse and robust audience.

However, as impressive as our own distributionwas, our main outlet or the education o taxpayers onsound tax policy remained the reprinting and quotingo our material by various news publications. In 1955,the combined reach o Tax Foundation-inspired articlesand publications was approximately 127 million read-ers, and by 1957, that number increased to over 400million worldwide.

Beginning in the late 1940s, we began to capital-ize on the growing popularity o televised productionsand continued to build its presence on radio stationsacross the country. In 1950, we created a motion pic-ture entitled Our Moneys Worth. The flm was usedby companies such as General Electric, Hiram Walker,and Westinghouse. State associations showed the flm

at more than500 meetings,with audiencesbetween 100and 4,500 view-ers. On the radioront, we createda series o threeiteen-minutesegments nar-

rated by RobertMontgomery, Raymond Moley, and Roswell Magillwhich were made available to state organizations or useon local radio programs.

Fast-orward hal a century and our communicationsteam takes on a much dierent appearance. Althoughwe still cater to businesses, news companies, legislators,and individuals, our methods o distribution and oureducational materials have evolved to take advantage othe modern technologies now available to us. In ear-lier years, when print media and phone calls were themain orms o communication, we measured successes

by noting how many times newspapers and magazinescontacted us with questions. Today, however, we main-tain a growing interactive website which is home tothousands o Tax Foundation documents; reporters,legislators, business owners, and curious individuals areable to access our inormation in just a ew clicks. Mediacitations are now tracked and logged by advanced sot-ware. Our presence on the radio is no longer restrictedto a limited number o pre-composed segments; rather,we regularly appear on stations across the country todiscuss topics that specifcally aect a particular region,while also commenting on stories o national interest.Although we no longer create lengthy motion pictures,we appear on the largest national news networks and avariety o local news channels, and we oer animatedand educational videos or public consumption on ourYouTube channel. Social media provides an additionaloutlet, allowing our most popular pieces to go viral.Tax Foundation reports and data can now be ound onFacebook, Twitter, LinkedIn, and Pinterest.

Having exised or hree-quarers o a cenury,we have adaped o hemany echnological andsocieal changes whichhave aken place.


26/28Winter 201324

Guest Columnist

Te 2013 axReorm Agendaby Rep. David Camp (R-MI), Chairman, House

Commitee on Ways and Means

Each o my predecessors, Republican andDemocrat, has taught me a great dealjustas the Tax Foundation has. This organization

consistently provides the resources, research, anddata that Congress needs to understand the impact

o tax policies. Please join me in applauding the TaxFoundations work and congratulating them on thisvery special milestonethe 75th Anniversary o theTax Foundation.

Lately, as I have thought about comprehensivetax reormboth the work that we have alreadydone and the work that is aheadthe 1986 eortkeeps creeping into my mind. Some things are di-erent, and yet, some things havent changed at all.

Undoubtedly, there are some striking similaritiesbetween 1986 and today. Then, we had a dividedgovernment with President Ronald Reagan in theWhite House and Speaker Tip ONeill in the U.SHouse. Then, we had an economy in perilunem-ployment was at seven percent in October o 1986when the Tax Reorm Act was signed into law.

And o course, Charlie Rangel was on the Waysand Means Committee. Like I said, some thingsnever change.

But there are substantive dierences too. Since1986, there has been an exponential growth in pass-through entities such as LLCs and S corporations


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tax watch, winter 2013

Documents