Bahl, Roy W.

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Georgia State University ScholarWorks @ Georgia State University ECON Publications Department of Economics 1978 The President's Tax Program Roy W. Bahl Georgia State University, rbahl@gsu.edu Follow this and additional works at: https://scholarworks.gsu.edu/econ_facpub  Part of the Economics Commons Recommended Citation The President's Tax Program. in Methods of Urban Impact Analysis, No. 1, Washington, DC: Office of Policy Development and Research, HUD, 1978. This Article is brought to you for free and open access by the Department of Economics at ScholarWorks @ Georgia State University. It has been accepted for inclusion in ECON Publications by an authorized administrator of ScholarWorks @ Georgia State University. For more information, please contact scholarworks@gsu.edu. Methods of urban impact analysis.United States.[Washington] : Dept. of Housing and Urban Development, Office of Policy Developmentand Research : for sale by the Supt. of Docs., U.S. Govt. Print. Off., 1979-https://hdl.handle.net/2027/inu.30000043843550Public Domain, Google-digitizedhttp://www.hathitrust.org/access_use#pd-googleWe have determined this work to be in the public domain,meaning that it is not subject to copyright. Users arefree to copy, use, and redistribute the work in part orin whole. It is possible that current copyright holders,heirs or the estate of the authors of individual portionsof the work, such as illustrations or photographs, assertcopyrights over these portions. Depending on the natureof subsequent use that is made, additional rights mayneed to be obtained independently of anything we canaddress. The digital images and OCR of this work wereproduced by Google, Inc. (indicated by a watermarkon each page in the PageTurner). Google requests thatthe images and OCR not be re-hosted, redistributedor used commercially. The images are provided foreducational, scholarly, non-commercial purposes.Housing and Urban Developmentelopment and Research1s of Urban Impact5sident's Tax Separtmentof Housing and Urban DevelopmentofPolicy Development and ResearchDoc  76 :1thods of Urban Impactalysise President's Tax»gram3 0000 043 843 550METHODS OF URBAN IMPACT ANALYSIS1 . THE PRESIDENT'S TAX PROGRAMJUN 25:23HH1.76 : 1U.S. DEPARTMENT OF HOUSING AND URBAN DEVELOPMENTOFFICE OF POLICY DEVELOPMENT AND RESEARCHFor sale by the Superintendent of Documents, U.S. Government Printing Omco, Washington, D.C. 20402INDIANA UNIVERSITYLAV LIDIARYThe views , conclusions , and recommendations in this report arethose of the contractor , who is solely responsible for the accuracyand completeness of all information and data presented herein . Thecontents of this report do not necessarily reflect the official viewsand policies , expressed or implied , of the Department of Housing andUrban Development or the United States Government .FOREWORDThis paper , the first in a series of policy research monographscalled Methods of Urban Impact Analysis reviews the probable effectof the President's 1978 tax program on cities and on housing .Prepared in January 1978 by Professor Roy W. Bahl of theMaxwell School at Syracuse University and Dr. David Puryear , ActingDirector of the Division of Economic Development and Public Finance inHUD's Office of Policy Development and Research , this effort representsan early , informal attempt at urban impact analysis . Unlike laterefforts , it does not follow a standardized format , but simply tries toidentify the most significant urban- and housing - related aspects of theproposed tax program .>The urban impact of this program is significant . The authors argueagainst extending the investment tax cred it to industrial structures onthe grounds that to do so would accelerate the process of suburbanization ,to the detriment of hard -pressed central cities . At the same time , theprogram's tax cuts will help central cities by stimulating the nationaleconomy and providing additional demand for employment .It is the purpose of this series to explore a variety of methodologicalapproaches to urban impact analysis . The Bahl and Puryear analysis isan appropriate starting point for such a series and illustrates what canbe done by first -rate analysts in a very brief time period without benefitof formal guidelines . Since the paper was written , President Carter hasincorporated urban impact analyses into his National Urban Policy , HUD'sOffice of Policy Development and Research has commissioned several prototypeurban impact analyses , and the Office of Management and Budget has issuedCircular A - 116 which provides guidelines for their preparation .Clearly , we are now in the age of urban impact analysis , and it isappropriate to inaugurate a series that will make available theexperiences of HUD staff and outside experts in preparing them . It is myhope that our methods will improve over time and that , as a result ,urban impact statements will become more precise and influential in thepolicy process .Zona S StaldeDonna E. ShalalaAssistant Secretary for PolicyDevelopment and ResearchACKNOWLEDGEMENTSThe authors wish to acknowledge the helpful comments of George Petersonof the Urban Institute and Emil Sunley and Harvey Galper of the Officeof Tax Analysis , Department of the Treasury in the preparation of thismanuscript . The opinions expressed in the analysis are those of theauthors .TABLE OF CONTENTSExecutive Summary 1The President's Tax Program 3Stimulative Impacts 5Income Distribution 10Urban Development 12Housing Impact 15Conclusion 16-- 3 -THE PRESIDENT'S TAX PROGRAM 1The $ 25 billion tax reduction called for in the President's Tax Programis an account of $ 9 billion in revenue - raising reforms . These proposedchanges fall into three categories : personal tax cuts and reforms ,corporate cuts and reforms , and a few special reforms .Net personal tax cuts and reforms of $ 17 billion include :oacross the board reductions in personal tax ratesof 2 percent ;replacement of the personal exemption and general taxcredit with a $ 240 per person credit ;-- elimination of the deductions for sales , personalproperty , gasoline , and miscellaneous taxes ;combination of the separate medical and casualtydeduction and allowing them only to the extent theyexceed the 10 percent of adjusted gross income ;repeal of the deduction for political contributionsbut retaining the credit ;elimination of the deductions claimed as businessrelated for theater and sporting tickets , yachts ,hunting lodges , club dues , and first - class airfairand limitation of deductions for the cost of mealsto 50 percent ;repeal of the special alternative tax on capitalgains ;-- sharply curtailed tax shelters , including• stronger minimum tax ;• extended " at risk " rule , with real estateexplicitly exempted from this extension ;• curtailment of accelerated depreciation ;with new multi - family housing curtailedless severely than other property , andwith new low - income housing not curtailedat all until 1983 ;• taxation of deferred annuities ;• classification of nominal partnerships ascorporations for tax purposes , with housingactivities exempted ;• tax audits of partnerships .taxation of unemployment compensation for higherincome taxpayers ;taxation of fringe benefits unavailable to rank andfile workers .1 Department of the Treasury , the President's 1978 Tax Program ,January 20 , 1978 .. 4 -Net tax cuts and reforms of $ 6 billion for corporations include :corporate tax rate cuts of 2 percent for income up to $ 50,000and 3 percent ( 4 percent in 1980 ) for income above $ 50,000 ;liberalized Investment Tax Credit ( ITC ) , consisting of• permanent 10 percent credit ;• ITC can offset 90 percent up from 50 percent of taxliabilities ;• eligibility of utility and industrial structures ( bothnew and substantial rehabilitation ) ;• eligibility of pollution control facilities for full10 percent credit even if special 5 -year amortizationis claimed .-- simplification of asset depreciation range ( ADR ) system ;simplification of treatment of small businesses ;-- limitations on bad debt losses claimed by financialinstitutions ;- elimination of tax exempt status of credit unions ;-- elimination of tax deferral on foreign income ;elimination of domestic international sales corporations( DISC ) .Net Tax cuts of $ 2 billion for excise and payroll taxes include :OO elimination of special excise tax on telephone calls ;-- reduction of unemployment insurance tax ;Finally , changes in the tax treatment of state and local governmentbonds include :taxable bond option for state and local governments ( 35 percentinterest subsidy in 1979 and 1980 ; 40 percent thereafter );elimination of tax exemption for industrial development bonds( IDB's ) for pollution control , industrial parks , and privatehospitals . ( Housing IDB's retain their exemption . )Not all of these proposals would have an impact on housing or urban areas ;only those which are discussed in the following sections .

The President\u27s Tax Program

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The President\u27s Tax Program

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