You are chief counsel to the chairman of the Joint Committee onTaxation, the body primarily responsible for identifying taxationissues and their consequences as Congress seeks to implement acomprehensive and coherent tax policy. Currently, the United Statesis in a bit of an economic slump. Corporate earnings reports arerelatively weak; the stock market is about 25% off of its five-yearhighs, and tax revenues are down. Largely as a result of the lastissue, the government finds itself operating under an annualdeficit, and the national debt hovers around $7,000,000,000.Interest rates, however, remain at historic lows. The president hassuggested a multiple-pronged attack to revitalize the economy.First, he has proposed permanently abolishing all capital gainstaxes. Second, he has proposed permanently cutting the marginalincome tax rates from 1% on the lowest taxpayers to 2â3% on themiddle class and 7% on the highest marginal rates of income. Topartially offset these reductions, however, he has proposedpermanently halving the child care and earned income credits.
The chairman has asked you for your analysis of these provisions.Please prepare a memorandum outlining your thoughts on each,including, but not necessarily limited to
(I) the effect of each recommendation on revenues and deficits,both in the short and long run;
(II) the effect of each recommendation on the economy;
(III) the relative effects of each recommendation on differentsocioeconomic groups of taxpayers;
(IV) the relative "fairness" of each recommended change; and
(V) your conclusion regarding whether any or all should beadopted.
You are chief counsel to the chairman of the Joint Committee onTaxation, the body primarily responsible for identifying taxationissues and their consequences as Congress seeks to implement acomprehensive and coherent tax policy. Currently, the United Statesis in a bit of an economic slump. Corporate earnings reports arerelatively weak; the stock market is about 25% off of its five-yearhighs, and tax revenues are down. Largely as a result of the lastissue, the government finds itself operating under an annualdeficit, and the national debt hovers around $7,000,000,000.Interest rates, however, remain at historic lows. The president hassuggested a multiple-pronged attack to revitalize the economy.First, he has proposed permanently abolishing all capital gainstaxes. Second, he has proposed permanently cutting the marginalincome tax rates from 1% on the lowest taxpayers to 2â3% on themiddle class and 7% on the highest marginal rates of income. Topartially offset these reductions, however, he has proposedpermanently halving the child care and earned income credits.
The chairman has asked you for your analysis of these provisions.Please prepare a memorandum outlining your thoughts on each,including, but not necessarily limited to
(I) the effect of each recommendation on revenues and deficits,both in the short and long run;
(II) the effect of each recommendation on the economy;
(III) the relative effects of each recommendation on differentsocioeconomic groups of taxpayers;
(IV) the relative "fairness" of each recommended change; and
(V) your conclusion regarding whether any or all should beadopted.
