1. 1 Making America Work* Jon Forman Alfred P. Murrah Professor of Law University of Oklahoma www.law.ou.edu/faculty/forman.shtml Law and Society Association Law, Society, and Taxation Panel 07 Montreal, Canada May 30, 2008 *A presentation based on Jonathan Barry Forman, Making America Work (Washington, DC: Urban Institute Press, 2006).

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6. 6 Table 1. Average Annual Earnings of Full-time Workers, 2004 Doctors$128,689 Lawyers 105,716 Economists 71,672 Nurses 53,289 Police 50,063 Auto mechanics 38,967 Secretaries 32,349 Garbage collectors 31,284 Orderlies 20,959 Waiters and waitresses 8,789

7. 7 Figure 5. Distribution of Earnings, 2004

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13. 13 Recent Policy Trends Encouraging Work Welfare reform Cutting tax rates on earned income Outlawed employment discrimination Social Security, pension, labor markets

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16. 16 Top 10 Income Tax Expenditures, 2009 (Billions of Dollars) Health insurance exclusion $168 Mortgage interest deduction 101 401(k) plans 51 Charitable contrib. (other than health & education) 47 Accelerated depreciation 44 Capital gains (except timber, iron ore, coal) 55 Deductible nonbusiness state and local taxes other than on houses 33 Employer plans 46 Step-up of basis at death 37 Capital gains exclusion on homes 34 2009 Federal Budget, Analytical Perspectives, Chapter 19, Tax Expenditures, Table 19-3

17. 17 Some Specific Recommendations Making Taxes Work Making Welfare Work Modestly Raising the Minimum Wage and indexing It for Inflation A Two-Tiered Social Security System A Restructured Pension System Universal Health Care Move Toward Full Employment

18. 18 Fig. 13. Percentage Composition of Federal Receipts by Source: 1940- 2005 0 10 20 30 40 50 60 1940195019601970198019902000 Year Percent Individual Income Tax Corporation Tax Social Insurance Excise Taxes Other

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21. 21 Figure 16. U.S. Payroll Tax Rates: Selected Years 0 2 4 6 8 10 12 14 16 18 20 1940196019802006 Year Percent paid jointly by employee and employer Medicare Social Security

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23. 23 Figure 18. Average Cumulative Tax Rates Confronting Low-to-Moderate-Income Families ($10k - $40k)

24. 24 Figure 19. Rates in a Comprehensive Tax and Transfer System

25. 25 Figure 20. $2,000 per Worker Earned Income Credit, with or without a Phase-out

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27. 27 Pre-transfer Earnings plus Universal Grants plus Worker Credit less Tax Imposed Equals After- tax Income 0$6,000 0 0 $5,000$6,000$1,000 $11,000 $10,000$6,000$2,000 $16,000 $20,000$6,000$2,000 $4,000 $24,000 $30,000$6,000$2,000 $6,000 $32,000 $40,000$6,000$2,000 $8,000 $40,000 $50,000$6,000$2,000 $10,000 $48,000 $100,000$6,000$2,000 $27,500 $80,500 $150,000$6,000$2,000 $45,000$113,000 $200,000$6,000$2,000 $62,500$145,500 Table 3. How a Comprehensive Tax and Transfer System Would Affect a Single Parent with Two Children

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29. 29 Figure 23. Minimum-Wage Earnings versus Poverty Levels, 1960-2007

30. 30 Figure 24. Life Expectancies at Birth versus Social Security Retirement Age

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32. 32 Fig. 26. Individual Account Benefit in the First Year of Retirement (3%-of-earnings IA, 2007 Dollars) Year Cohort Turns 65 Single Male LowAverageHighTax Max 2005---- 2025$1,137$2,527$4,043$6,166 2045$3,488$7,752$12,403$18,936 2065$4,965$11,033$17,652$26,998

33. 33 Fig. 27. Individual Account Replacement Rates (3%-of-earnings IA as a Percent of Final Wage) Year Cohort Turns 65 Single Male LowAverageHighTax Max 20050.0 20255.1 5.0 204512.5 206514.4

34. 34 Table 4. Health Coverage 2006 Source of Coveragemillionspercentage Total population296.8100.0 Employment-based coverage 177.2 59.7 Individually Purchased 27.1 9.1 Public 80.3 27.1 Medicare 40.3 13.6 Medicaid 38.3 12.9 Military health care 10.5 3.5 No health insurance 47.0 15.8

35. 35 Clusters without Coverage Employees of small businesses Workers who lose their jobs Workers who decline employer coverage Low-income parents Low-income childless adults The near elderly Young adults Children Immigrants

36. 36 Transition to Expanded Coverage Tax Changes: cap the exclusion for employer- provided insurance at a fixed dollar amount and gradually replace it with a tax credit Employer Mandate: require employers to offer a plan, and automatically enroll workers Individual Mandate: require workers to get coverage

37. 37 Summary—Making America Work Government should intervene –To encourage work –Promote economic justice Tax, spending, and regulatory proposals –Increase the size of the economic pie –Allow us to divide it more equally

38. 38 About the Author Jonathan Barry Forman (“Jon”) is the Alfred P. Murrah Professor of Law at the University of Oklahoma, where he teaches courses on tax and pension law. Professor Forman is also Vice Chair of the Board of Trustees of the Oklahoma Public Employees Retirement System (OPERS) and the author of Making America Work (Washington, DC: Urban Institute Press, 2006), http://www.urban.org/books/makingamericawork/index.cfm. http://www.urban.org/books/makingamericawork/index.cfm Prior to entering academia, Professor Forman served in all three branches of the federal government. He has a law degree from the University of Michigan, and he also has master’s degrees in economics and psychology. Jon can be reached at jforman@ou.edu or (405) 325-4779. His web page is www.law.ou.edu/faculty/forman.shtml.jforman@ou.eduwww.law.ou.edu/faculty/forman.shtml