TaxProf Blog

Editor: Paul L. Caron, Dean
Pepperdine University School of Law

Tuesday, November 7, 2017

New 'Paradise Papers' Data Leak

Paradise PapersA new investigative report from the International Consortium of Investigative Journalists (ICIJ) and its media partners broke on Sunday. (ICIJ is the investigative journalist consortium that brought us last year's Panama Papers investigation, for which they won a Pulitzer for Explanatory Reporting.)

ICIJ: Offshore Trove Exposes Trump-Russia Links And Piggy Banks Of The Wealthiest 1 Percent:

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November 7, 2017 in Political News, Shuyi Oei, Tax, Think Tank Reports | Permalink | Comments (1)

Thursday, November 2, 2017

2017 International Tax Competitiveness Ranking: U.S. Is 6th From The Bottom

Tax Foundation Logo2017 International Tax Competitiveness Index:

The International Tax Competitiveness Index (ITCI) seeks to measure the extent to which a country’s tax system adheres to two important aspects of tax policy: competitiveness and neutrality. ... To measure whether a country’s tax system is neutral and competitive, the ITCI looks at more than 40 tax policy variables. These variables measure not only the level of taxes, but also how taxes are structured. The Index looks at a country’s corporate taxes, individual income taxes, consumption taxes, property taxes, and the treatment of profits earned overseas. The ITCI gives a comprehensive overview of how developed countries’ tax codes compare, explains why certain tax codes stand out as good or bad models for reform, and provides important insight into how to think about tax policy.

Tax Foundation

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November 2, 2017 in Tax, Think Tank Reports | Permalink | Comments (1)

Tuesday, October 24, 2017

2018 Business Tax Climate: Chilliest In Blue States, Warmest In Red States

Tax Foundation logoThe Tax Foundation has released the 2018 State Business Tax Climate Index, which ranks the fifty states according to five indices: corporate tax, individual income tax, sales tax, unemployment insurance tax, and property tax. Here are the ten states with the best and worst business tax climates:

1

Wyoming

41

Rhode Island

2

South Dakota

42

Louisiana

3

Alaska

43

Maryland

4

Florida

44

Connecticut

5

Nevada

45

Ohio

6

Montana

46

Minnesota

7

New Hampshire

47

Vermont

8

Utah

48

California

9

Indiana

49

New York

10

Oregon

50

New Jersey

Interestingly, eight of the ten states with the worst business tax climates voted for Hillary Clinton in the 2016 presidential election, and seven of the ten states with the best business tax climates voted for Donald Trump.

Tax Foundation
 

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October 24, 2017 in Tax, Think Tank Reports | Permalink | Comments (1)

Friday, August 4, 2017

Oregon’s New Bicycle Excise Tax: Tax Policy Center And Tax Foundation Commentary

TaxVox, The Case of Oregon’s Bicycle Excise Tax:

Road trips are a staple of my family’s summer. We load up the van and head to the nearest state park, flash our Michigan Recreation Passport and off we go, hiking and biking. That “passport” is an annual $11 fee that we add to our license plate renewal payment. In exchange, we get unlimited access to all state parks, and the state uses the money, along with day-trippers’ fees, to maintain and improve the facilities.

Oregon, one of five states with no sales tax, just passed such a tax on bicycles to help fund trail maintenance and improvement. That decision generated a good bit of controversy, and as a bicycle-riding, trail-loving taxpayer, I wondered why a bicycle tax that supports bicycle trail use is so contentious.

Here are some details: Starting in October, Oregon will collect $15 on the purchase of every bicycle that retails for $200 or more. The state expects the excise tax to generate $1.2 million annually that will be used to “expand and improve commuter routes for non-motorized vehicles and pedestrians, including bicycle trails, footpaths and multi-use trails.”

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August 4, 2017 in Tax, Think Tank Reports | Permalink | Comments (5)

Tuesday, July 18, 2017

Reforming U.S. Corporate Taxes

Veronique de Rugy (Mercatus Center), Reforming US Corporate Taxes:

The United States has fallen far behind other developed countries when it comes to corporate tax reform. In contrast to other developed nations, the United States has declined to reform the way it taxes corporations. Consequently, it now has the highest statutory corporate income tax rate of the G20 countries. The federal government needs to lower the corporate income tax rate-a reform that will improve the competitiveness of American businesses and encourage economic growth.

MC

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July 18, 2017 in Tax, Think Tank Reports | Permalink | Comments (9)

Tuesday, June 13, 2017

Billion Dollar Blind Spot: How the U.S. Tax Code's Small Business Expenditures Impact Women Business Owners

BillionCaroline Bruckner (Kogod Tax Policy Center), Billion Dollar Blind Spot: How the U.S. Tax Code's Small Business Expenditures Impact Women Business Owners:

In 1976, the U.S. Census Bureau (Census) released its first ever report on the state of women's business ownership in the United States that counted 402,025 women-owned U.S. firms representing only 4.6% of all firms and 0.3% of all U.S. business receipts, as of 1972. Today, women-owned firms have increased to 11.3 million businesses representing 38% of all U.S. firms.

During this period of extraordinary growth, Congress has acted to promote women's business ownership by passing legislation designed to eliminate discriminatory lending practices and promote federal contracting and counseling opportunities for women business owners. At the same time, Congress has also worked to enhance the U.S. tax code (the "Code") to aid small businesses with tax expenditures that will cost U.S. taxpayers more than $255 billion in the next five years under current law.

However, at no point have policymakers looked at whether this will be money well spent when it comes to women business owners and the challenges they have growing their receipts and accessing capital.

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June 13, 2017 in Tax, Think Tank Reports | Permalink | Comments (0)

Sunday, April 23, 2017

Today Is Tax Freedom Day — Earlier In MS, TN & SD, Later In CT, NJ & NY

Tax Foundation logoTax Foundation, Tax Freedom Day 2017 is April 23rd:

  • This year, Tax Freedom Day falls on April 23rd, 113 days into the year.
  • Tax Freedom Day is a significant date for taxpayers and lawmakers because it represents how long Americans as a whole have to work in order to pay the nation’s tax burden.
  • Americans will pay $3.5 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total bill of more than $5.1 trillion, or 31 percent of the nation’s income.
  • Americans will collectively spend more on taxes in 2017 than they will on food, clothing, and housing combined.
  • If you include annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur 14 days later, on May 7.

Tax Freedom Day

Center on Budget and Policy Priorities, Tax Foundation Figures Do Not Represent Typical Households’ Tax Burdens: Figures May Mislead Policymakers, Journalists, and the Public:

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April 23, 2017 in Tax, Think Tank Reports | Permalink | Comments (0)

Friday, March 10, 2017

The 35 Percent Corporate Tax Myth: Corporate Tax Avoidance By Fortune 500 Companies, 2008 To 2015

New York Times, Profitable Companies, No Taxes: Here’s How They Did It:

Complaining that the United States has one of the world’s highest corporate tax levels, President Trump and congressional Republicans have repeatedly vowed to shrink it.

Yet if the level is so high, why have so many companies’ income tax bills added up to zero?

That’s what a new analysis of 258 profitable Fortune 500 companies that earned more than $3.8 trillion in profits showed [The 35 Percent Corporate Tax Myth: Corporate Tax Avoidance by Fortune 500 Companies, 2008 to 2015].

18 CorpsAlthough the top corporate rate is 35 percent, hardly any company actually pays that. The report, by the Institute on Taxation and Economic Policy, a left-leaning research group in Washington, found that 100 of them — nearly 40 percent — paid no taxes in at least one year between 2008 and 2015. Eighteen, including General Electric, International Paper, Priceline.com and PG&E, incurred a total federal income tax bill of less than zero over the entire eight-year period — meaning they received rebates. The institute used the companies’ own regulatory filings to compute their tax rates. ...

How does a billion-dollar company pay no taxes?

Companies take advantage of an array of tax loopholes and aggressive strategies that enable them to legally avoid paying what they owe. The institute’s report cites these examples:

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March 10, 2017 in Tax, Think Tank Reports | Permalink | Comments (6)

Friday, March 3, 2017

How High Are Corporate Income Tax Rates In Your State?

Friday, February 24, 2017

Pew:  How Governments Support Higher Education Through The Tax Code

Pew Charitable Trusts, How Governments Support Higher Education Through the Tax Code (2017):

To maximize the impact of higher education investments and achieve desired policy goals, policymakers should have knowledge of the full range of assistance provided to institutions and students. This means having an understanding of the billions of dollars made available through spending programs and the tax code. However, too frequently these two types of support are not considered in tandem, and most states lack the cost estimates they would need to determine how tax provisions for higher education compare in size to other postsecondary investments.

The federal government and the states each invested more than $70 billion in higher education-related spending programs, excluding loans, in academic year 2014, the latest year for which data are available. But that figure, as substantial as it is, does not paint a full picture of federal and state investments in higher education. It excludes the billions of dollars that the federal government and the 41 states plus the District of Columbia that levy personal income taxes provide to students and their families through tax expenditures—such as credits for tuition and college savings incentives—to help offset postsecondary costs.

Figure 1

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February 24, 2017 in Tax, Think Tank Reports | Permalink | Comments (1)

Monday, January 30, 2017

The Role Of State And Local Taxes In Income Inequality

Institute on Taxation and Economic Policy, Fairness Matters: A Chart Book on Who Pays State and Local Taxes:

There is significant room for improvement in state and local tax codes. Income tax laws are filled with top-heavy exemptions and deductions. Sales tax bases are too narrow and need updating. And overall tax collections are often inadequate in the short-run and unsustainable in the long-run. In this light, the growing interest in tax reform among state lawmakers across the country is welcome news.

Too often, however, would-be tax reformers have proposed policy changes that would worsen one of the most undesirable features of state and local tax systems: their lopsided impact on taxpayers at varying income levels. Nationwide, the bottom 20 percent of earners pay 10.9 percent of their income in state and local taxes each year. Middle-income families pay a slightly lower 9.4 percent average rate. But the top 1 percent of earners pay just 5.4 percent of their income in such taxes. This is the definition of regressive, upside-down tax policy.

Inequality

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January 30, 2017 in Tax, Think Tank Reports | Permalink | Comments (1)

Wednesday, January 18, 2017

Just 8 Men Own The Same Wealth As Half The World

Oxfam

OxFam, An Economy for the 99%: It’s Time to Build a Human Economy That Benefits Everyone, Not Just the Privileged Few:

New estimates show that just eight men [Jeff Bezos, Michael Bloomberg, Warren Buffett, Larry Ellison, Amancio Ortega Gaona, Bill Gates, Carlos Slim Helú, Mark Zuckerberg] own the same wealth as the poorest half of the world. As growth benefits the richest, the rest of society – especially the poorest – suffers. The very design of our economies and the principles of our economics have taken us to this extreme, unsustainable and unjust point.

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January 18, 2017 in Tax, Think Tank Reports | Permalink | Comments (3)

Tuesday, December 27, 2016

The Role Of State Estate And Inheritance Taxes After Repeal Of The Federal Estate Tax

Institute  on Taxation and Economic Policy, State Estate and Inheritance Taxes:

For much of the last century, estate and inheritance taxes have played an important role in fostering strong communities by promoting equality of opportunity and helping states adequately fund public services. While many of the taxes levied by state and local governments fall most heavily on low-income families, only the very wealthy pay estate and inheritance taxes.

Changes in the federal estate tax in recent years, however, caused states to reevaluate the structure of their estate and inheritance taxes. Unfortunately, the trend of late among states has tended toward weakening or completely eliminating them.

ITEP

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December 27, 2016 in Tax, Think Tank Reports | Permalink | Comments (1)

Wednesday, December 14, 2016

Oxfam:  The Dangerous Race To The Corporate Tax Bottom

OxfamOxfam, Tax Battles: The Dangerous Race to the Bottom on Corporate Tax (summary) (methodology):

Collecting tax is one of the key means by which governments are able to address poverty and inequality. But big business is dodging tax on an industrial scale, depriving governments across the globe of the money they need to address poverty and invest in healthcare, education and jobs. This report exposes the world’s worst corporate tax havens — extreme examples of a destructive race to the bottom on corporate tax which has seen governments across the globe slash corporate tax bills in an attempt to attract business. It calls on governments to work together to put a stop to this before it is too late.

Table 1

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December 14, 2016 in Tax, Think Tank Reports | Permalink | Comments (7)

Mark Mazur To Replace Len Burman As Director Of Tax Policy Center

MazurWall Street Journal, Treasury Tax Policy Chief to Lead Tax Policy Center Think Tank:

The top tax policy expert at the U.S. Treasury Department will take over the Tax Policy Center, the nonprofit Washington think tank best known for its analyses of political and congressional tax proposals.

Mark Mazur, assistant secretary for tax policy, will become the center’s director on Feb. 1, the group announced today. The Tax Policy Center is a project of the Urban Institute and Brookings Institution, and it operates a model that allows policymakers to see the impact of tax plans on different income groups.

Mr. Mazur, an economist, has had a long career in the government, including a stint as the Internal Revenue Service’s director of research, analysis and statistics. President Barack Obama nominated him to his current job, which he has held since 2012.

Tax Vox:  Mark Mazur to Take Over as TPC Director, by Leonard E. Burman:

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December 14, 2016 in Tax, Think Tank Reports | Permalink | Comments (2)

Country-By-Country Tax Reporting And Global Inequality

Tax Justice NetworkTax Justice Network, Country-By-Country Reporting: How Restricted Access Exacerbates Global Inequalities in Taxing Rights:

Fully public country-by-country reporting would enable a dramatic shift in the accountability of both multinationals and tax jurisdictions. Estimates of the losses due to tax avoidance imply that lower-income countries would benefit disproportionately, as this transparency would offer powerful leverage against the current, highly unequal global distribution of taxing rights over multinationals. The OECD’s welcome adoption of the Tax Justice Network’s original proposal is, however, critically undermined by the decision to impose multiple limits on access to the data. This paper explores these limits, and demonstrates how the resulting unequal access is likely to exacerbate, rather than ameliorate that inequality in taxing rights.

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December 14, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, November 10, 2016

Batchelder:  How To Strengthen Wealth Transfer Taxation

2016-Delivering-equitable-growthLily L. Batchelder (NYU), The 'Silver Spoon' Tax: How to Strengthen Wealth Transfer Taxation, in Washington Center for Equitable Growth, Delivering Equitable Growth: Strategies for the Next Administration (Fall 2016):

Wealth transfer taxes are a critical policy tool for mitigating economic inequality, including inequality of opportunity. They are also relatively efficient. This short essay summarizes why and how wealth transfer taxes should be strengthened. Reform options that our next President should consider include increasing the wealth transfer tax rate, broadening the base, repealing stepped-up basis, addressing talking points against wealth transfer taxes with little or no factual basis, and converting the estate and gift taxes into a direct tax on the recipients of large inheritances. ...

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November 10, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (4)

Sunday, October 30, 2016

Tax Reform For Our Century

Room to GrowRyan Ellis (Conservative Reform Network), Tax Reform For Our Century:

In his book as part of the Room To Grow series, Ryan Ellis identifies four fundamental flaws that beset America’s current tax code and offers principled, practical solutions to reform the system.

First, our business tax code is a barrier to growth, replete with tax rates that are among the highest in the developed world, often approaching 50 percent. The code also levies multiple layers of taxation against certain kinds of income and imposes an arbitrary, punitive system that inhibits business investment. To reform the business tax code, Ellis proposes several solutions, including establishing a lower, more competitive tax rate, reducing taxes on capital gains, and allowing businesses to deduct 100 percent of their investments in the year they are made.

Second, the tax code burdens middle-class families, particularly in the form of payroll taxes and a low, per-child tax credit, which hasn’t been increased since 2001. To provide them with much needed relief, Ellis offers several suggestions, including reducing the payroll tax and increasing the per-child tax credit.

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October 30, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Monday, October 10, 2016

33% Of $800 Million California Film Tax Credits Went To Projects That Would Have Been Made In The State Anyway

Following up on my previous post, Starstruck States Squander $10 Billion In Film Tax Incentives Producing Minimal Economic Returns:  California Legislative Analyst's Office, California's First Film Tax Credit Program:

Figure 1California provides tax incentives for qualified film and television productions to be made in the state. The first film tax credit program was adopted in 2009 and provided $800 million ($100 million per year over eight years) in credits to selected feature films and television projects. In 2014, the Legislature created a new film tax credit program that increased the available amount of tax credits to $330 million per year—beginning in the 2015–16 fiscalyear—and modified the program in various ways.

In this report, as required by law, we evaluate the economic effects and the administration of the first film tax credit program passed in 2009. We find that about one–third of the film and television projects receiving incentives under this program would probably have been made in California anyway. We suspect that this level of “windfall benefits” to some credit recipients may be low compared to other tax credits, which would suggest that the first film tax credit program targeted the types of production vulnerable to being filmed outside the state relatively well.

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October 10, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Friday, October 7, 2016

Goldilocks Meets Private Equity: Taxing Carried Interest Just Right

Tax Polcy Center Logo (2017)Donald Marron (Tax Policy Center), Goldilocks Meets Private Equity: Taxing Carried Interest Just Right:

Controversy rages about how to tax carried interest. One view sees carry as compensation that should be taxed like other labor income. Another sees carry as a reward for financial risk-taking that should be taxed like capital income. A third sees carry as creating a costly tax arbitrage. In this paper, Donald Marron shows how we can reconcile these three views. Current practice taxes carry too little. Treating it as labor income without other reforms taxes it too much. To tax carried interest just right, it should be labor income for managers and deductible against ordinary income for investors.

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October 7, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, October 6, 2016

2016 International Tax Competitiveness Ranking: U.S. Is 5th From The Bottom

ITCPress Release:

[T]he Tax Foundation released the third annual International Tax Competitiveness Index. Once again, the United States ranks among the bottom 5 countries with the 5th least competitive tax system in the OECD. Only Greece, Portugal, Italy, and France have less competitive tax codes. On the other end of the spectrum, Estonia takes the number one spot once again, with New Zealand and Latvia having the second and third most competitive tax systems, respectively.

Table 5

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October 6, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Tuesday, October 4, 2016

The Top 1% Get 17% Of Income, 27% Of Tax Expenditures

1%Bloomberg, How the IRS Helps the Rich Get Richer:

The top 1 percent gets the most from federal tax breaks, a new report shows, fueling election-year outrage over income inequality. ...

The top 1 percent of Americans as measured by income rake in 17 percent of all U.S. income on an annual basis—before taxes, of course. And that caveat is important, according to a new analysis by the Tax Policy Center (TPC), because that select group of citizens gets 27 percent of the tax breaks doled out by the federal government.

The TPC’s calculations show an estimated $1.17 trillion in federal revenue last year going to individual tax expenditures. ... While the wealthy see an outsize benefit compared with their share, the lowest-income households get just about 4 percent of federal tax breaks, close to their portion of all pretax income. That same trend holds for taxpayers in middle- and upper-middle-income households.

TPC

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October 4, 2016 in Tax, Think Tank Reports | Permalink | Comments (4)

Thursday, September 29, 2016

2017 Business Tax Climate: Chilliest in Blue States

Tax Foundation logoThe Tax Foundation has released the 2017 State Business Tax Climate Index, which ranks the fifty states according to five indices: corporate tax, individual income tax, sales tax, unemployment insurance tax, and property tax. Here are the ten states with the best and worst business tax climates:

1

Wyoming

41

Louisiana

2

South Dakota

42

Maryland

3

Alaska

43

Connecticut

4

Florida

44

Rhode Island

5

Nevada

45

Ohio

6

Montana

46

Minnesota

7

New Hampshire

47

District of Columbia

8

Indiana

48

California

9

Utah

49

New York

10

Oregon

50

New Jersey

Interestingly, nine of the ten of the states with the worst business tax climates voted for Barack Obama in the 2012 presidential election, and six of the ten states with the best business tax climates voted for Mitt Romney.

2017 Business Tax Climate

 

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September 29, 2016 in Tax, Think Tank Reports | Permalink | Comments (2)

Sunday, September 25, 2016

End The Public Service Loan Forgiveness Bonanza For Graduate And Professional Schools

Brookings (2016)Brookings Institution:  The Coming Public Service Loan Forgiveness Bonanza, by Jason Delisle (American Enterprise Institute):

Abstract: The federal government is making more data available about the performance of the Public Service Loan Forgiveness (PSLF) program for federal student loans. Many policymakers are not aware of this program, but the new data reveal PSLF is growing rapidly and is larger than most observers expected. Budget agencies recently revised the projected cost of the program upward by a staggering amount, and the U.S. Department of Education reports that many PSLF enrollees borrowed over $100,000 to finance graduate degrees. Recent research suggests that borrowers in certain professions stand to have their entire graduate and professional educations paid for through loan forgiveness under PSLF. In light of these developments, reforms that limit the most excessive features of PSLF are warranted, although repealing PSLF altogether and letting the federal Income-Based Repayment program (IBR) accomplish the goal of PSLF is an even better course of action.

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September 25, 2016 in Legal Education, Think Tank Reports | Permalink | Comments (11)

Tuesday, September 13, 2016

Five Myths About Economic Inequality In America

CatoMichael D. Tanner (Cato Institute), Five Myths about Economic Inequality in America:

Over the past several years, economic inequality has risen to the forefront of American political consciousness. Politicians, pundits, and academics paint a picture of a new Gilded Age in which a hereditary American gentry becomes ever richer, while the vast majority of Americans toil away in near-Dickensian poverty. As economist and New York Times columnist Paul Krugman puts it, “Describing our current era as a new Gilded Age or Belle Époque isn’t hyperbole; it’s the simple truth.” Political candidates have leapt on the issue. ...

It’s a compelling political narrative, one that can be used to advance any number of policy agendas, from higher taxes and increases in the minimum wage to trade barriers and immigration restrictions. But it is fundamentally wrong, based on a series of myths that sound good and play to our emotions and sense of fairness, but that don’t hold up under close scrutiny.

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September 13, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (5)

Friday, September 9, 2016

Corporate Inversions Benefit CEOs More Than Shareholders

Cato at Liberty:  Corporate Inversions, by Peter Van Doren:

Among industrialized countries, the United States has the highest official corporate tax rate and one of the highest effective tax rates. To take advantage of lower taxes in other countries, some U.S. firms elect to sell themselves to smaller foreign firms, a process called “inversion.”

For shareholders of those firms, the tax consequences of inversions are complicated. Some are harmed by the move while others benefit. Individual shareholders, who own shares in taxable accounts, are taxed on the increased value of their shares. This can result in different tax outcomes from inversions for shareholders who have held the stock for a long time prior to the inversion and short-term shareholders (including corporate officers exercising company stock options).

In the summer issue of Regulation, I described a new research paper that investigates 73 inversions that occurred from 1983 to 2014 [Anton Babkin (Wisconsin), Brent Glover (Carnegie Mellon) & Oliver Levine (Wisconsin), Are Corporate Inversions Good for Shareholders?]. For those investors who had owned stock for three years, half of the inversions resulted in a negative return. So if many long-term shareholders lose money on inversions, why do they occur?

The answer appears to be that corporate executives gain from inversions even if shareholders lose.

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September 9, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Monday, September 5, 2016

Labor Day And The Tax Burden On Labor

Kyle Pomerleau & Kevin Adams (Tax Foundation), A Comparison of the Tax Burden on Labor in the OECD, 2016:

Although the United States and most OECD countries are known for having progressive tax systems that tax high-income earners more than low- or moderate-income earners, a large portion of the tax burden still falls on the average worker. Even here in the United States, which has a lower tax burden than most other OECD countries, average workers end up paying nearly one-third of their incomes in taxes. It is true that governments in the OECD, especially European countries, provide more government programs. However, their workers end up paying a much higher price for them.

Tax Foundation 1

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September 5, 2016 in Tax, Think Tank Reports | Permalink | Comments (1)

Monday, August 22, 2016

U.S. Corporate Tax Rate Is Third Highest In World Among 173 Countries, Behind Only Chad, United Arab Emirates

Tax Foundation logoTax Foundation, Corporate Income Tax Rates around the World, 2015:

It is well known that the United States has the highest corporate income tax rate among the 34 industrialized nations of the Organisation for Economic Co-operation and Development (OECD). However, it is less well known how the United States stacks up against countries throughout the entire world. Expanding the sample of countries and tax jurisdictions to 173, the U.S.’s corporate tax rate of 39 percent is the third highest in the world, tied with Puerto Rico and lower only than the United Arab Emirates and Chad, which have rates of 55 and 40 percent, respectively. The U.S. tax rate is 16 percentage points higher than the worldwide average of 22.8 percent and a little more than 9 percentage points higher than the worldwide GDP-weighted average of 29.8 percent. As with the average tax rate among industrialized nations, the average worldwide tax rate has been declining in the past ten years, pushing the United States farther from the norm. This worldwide decline in corporate tax rates can been seen in all regions of the world.

Table 1

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August 22, 2016 in Tax, Think Tank Reports | Permalink | Comments (3)

Friday, August 19, 2016

Pro Publica:  IRS Loophole Rewards Excessive Water Use In Drought-Stricken West

Pro PublicaPro Publica, Gimme a Break! IRS Tax Loophole Can Reward Excessive Water Use in Drought-stricken West:

ProPublica’s reporting on the water crisis in the American West has highlighted any number of confounding contradictions worsening the problem: Farmers are encouraged to waste water so as to protect their legal rights to its dwindling supply in the years ahead; Las Vegas sought to impose restrictions on water use while placing no checks on its explosive population growth; the federal government has encouraged farmers to improve efficiency in watering crops, but continues to subsidize the growing of thirsty crops such as cotton in desert states like Arizona.

Today, we offer another installment in the contradictions amid a crisis.

In parts of the western U.S., wracked by historic drought, you can get a tax break for using an abundance of water.

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August 19, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Wednesday, August 17, 2016

Federal Taxes Are Very Progressive

Tax Vox: Federal Taxes Are Very Progressive, by Robertson Williams:

The US federal tax system is highly progressive, primarily because individual income tax rates rise sharply with income and refundable tax credits lead to negative income taxes for households with low income. Updated estimates from the Tax Policy Center project that effective federal tax rates this year will range from 3.5 percent for households in the lowest-income quintile (or fifth) to 33.0 percent for those in the top 1 percent.

The effective federal tax rate for all households—including individual and corporate income taxes, payroll taxes, excise taxes, and estate and gift taxes—will average 19.9 percent in 2016. Individual income taxes will account for half of total revenue (9.9 percent of income) and payroll taxes will provide just over a third (6.9 percent of income). Most of the rest will come from corporate income taxes (2.1 percent of income) with just 5 percent coming from excise and estate and gift taxes (a combined 1 percent of income).

Vox

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August 17, 2016 in Tax, Think Tank Reports | Permalink | Comments (6)

Thursday, August 11, 2016

Ending The Pass-Through Tax Loophole For Big Business

CAPCenter for American Progress, Ending the Pass-Through Tax Loophole for Big Business:

In 2012, more than 100,000 big U.S. businesses managed to shelter billions of dollars of income in a single tax haven and pay no corporate income tax on it.

This tax haven is not Panama, Switzerland, or the Cayman Islands. In fact, it cannot even be found on a map—rather, it exists in the pages of the U.S. tax code. These businesses—with revenue of more than $10 million each—managed to pay no U.S. corporate income tax by pretending to be small businesses and thus saved their wealthy owners billions of dollars.

Most people think of big businesses as traditional corporations, which are organized under Subchapter C of the tax code and are supposed to pay the corporate income tax on their profits. But today many big businesses are organized as partnerships or S corporations, which are business forms that were originally designed for simpler or smaller businesses. The vast majority of partnerships and S corporations do not pay the corporate income tax. Instead, all of their income is passed through to their individual owners, who pay taxes on their individual income tax returns, thus avoiding the corporate income tax altogether.

The share of income going to businesses that use the pass-through form of organization—and therefore pay no corporate income tax—has exploded over the last 30 years, growing from less than 25 percent of net business income in 1980 to more than half in 2012. In fact, the United States is unique in this regard: No other country comes close to having such a large portion of business income that is not subject to the corporate income tax.

Small Business Tax Rate

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August 11, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (4)

Kamin:  Taxing Capital—Paths To A Fairer And Broader U.S. Tax System

Washington Center for Equitable Growth logoDavid Kamin (NYU), Taxing Capital: Paths to a Fairer and Broader U.S. Tax System:

Taxing capital is a key way to maintain and increase the progressivity in the U.S. tax system and raise the revenue needed to support government activities and investments that in turn will help ensure strong and sustainable economic growth. Why turn to capital as a source of government revenue? Taxing capital is a highly progressive form of taxation that research suggests does not seriously affect the rate of savings among high-income Americans—an important consideration in terms of encouraging future economic growth—and is a key part of optimal taxation in the United States.

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August 11, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Monday, June 20, 2016

AEI & TPC:  A New Proposal For Corporate Tax Reform

American Enterprise Institute & Tax Policy Center, A New Proposal for Corporate Tax Reform:

Eric Toder & Alan D. Viard, A Proposal to Reform the Taxation of Corporate Income:

  • Reduce corporate tax rate to 15 percent
  • Tax at ordinary rates dividends and marked-to-market capital gains of taxable American shareholders of publicly traded companies
  • Allow (only) those shareholders an imputation credit for corporate taxes – 17.5 percent of cash or stock dividends
  • Provisions to address volatility, companies going public, tax-exempt shareholders, transition, etc.

Discussion of the proposal:

  • Daniel N. Shaviro (NYU)
  • Joann Weiner (George Washington)
  • Howard Gleckman (Tax Policy Center)

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June 20, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Wednesday, June 15, 2016

Tax Foundation:  Modeling The Estate Tax Proposals Of 2016

Tax Foundation:  Modeling the Estate Tax Proposals of 2016, by Alan Cole:

Tax Foundation

Key Findings:

  • Several lawmakers and presidential candidates in 2016 have proposed changes to the federal estate tax. These changes are a worthwhile case study in economic modeling of tax proposals.
  • The estate tax’s marginal rate greatly exceeds its average rate, which makes its disincentives to save relatively strong for the small amount of revenue collected.

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June 15, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, June 9, 2016

Tax Foundation:  Options For Reforming America’s Tax Code

TF_Options_for_Reforming_Americas_Tax_CodeTax Foundation, Options For Reforming America’s Tax Code:

There is a widespread consensus among Americans across the political spectrum that the U.S. tax system is overly complex, inefficient, uncompetitive, and due for an overhaul. However, Congress has not passed a comprehensive tax reform bill in three decades. As a result, many lawmakers have set their sights on the 2017 legislative session as an opportunity to hammer out a tax reform deal.

Because so many parts of the U.S. tax code are in need of change, any tax reform bill considered by Congress is likely to be hundreds of pages long and contain dozens of distinct provisions. As a result, lawmakers and voters may be unsure of the effects of each separate tax change on federal revenue collections, the tax burden borne by different groups of Americans, and the growth of the U.S. economy.

To assist lawmakers in assembling tax reform bills over the coming months, and to help the American public in understanding the tax changes being proposed, we have assembled this book: Options for Reforming America’s Tax Code.

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June 9, 2016 in Tax, Think Tank Reports | Permalink | Comments (4)

Wednesday, June 1, 2016

Ranking The States By Fiscal Condition, From Top (AK, NE, WY) To Bottom (CT, MA, NJ)

George Mason University Mercatus Center, Ranking the States by Fiscal Condition, 2016 Edition:

A new study for the Mercatus Center at George Mason University ranks each US state’s financial health based on short- and long-term debt and other key fiscal obligations, such as unfunded pen­sions and healthcare benefits. This 2016 edition updates the version the Mercatus Center pub­lished in 2015. Using the approach pioneered in 2015, the 2016 edition presents information from each state’s audited financial report in an easily accessible format, this time including Puerto Rico to provide a benchmark of poor fiscal performance.

Mercatus

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June 1, 2016 in Tax, Think Tank Reports | Permalink | Comments (8)

Monday, May 23, 2016

Report:  The Tax Code Is Out Of Step With Today's On-Demand Platform Economy

KogodTax Policy Center, Kogod School of Business, American University,  Shortchanged: The Tax Compliance Challenges of Small Business Operators Driving the On-Demand Platform Economy

The last time Congress enacted substantial tax reform—in 1986—only 8.2% of American households owned personal computers. Today, more than 87% of American adults own a mobile phone and on-demand platforms like Uber, Etsy, Lyft, Airbnb, HomeAway, Amazon, and TaskRabbit have become household names by connecting businesses and consumers. Although millions of Americans are engaging in the on-demand platform economy every day as sellers and service providers, the tax compliance challenges this new frontier presents have gone relatively unnoticed. At the same time, these challenges will grow with this fastest growing segment of the labor economy— creating unnecessary and ongoing burdens for the small business operators who power the on-demand economy. 

This report, in keeping with the mission of the Kogod Tax Policy Center to conduct non-partisan research on tax issues specific to small businesses and entrepreneurs, identifies the tax compliance challenges the on-demand economy presents for its small business operators. Having spent more than a year investigating this growing problem, we report that:

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May 23, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, May 19, 2016

TPC Study Fuels New Congressional Push To Integrate Corporate And Shareholder Taxes

Wall Street Journal, Fewer Shareholders Pay U.S. Taxes on Dividends: New Study Is Bolstering Drive to Shift Tax Burden From Corporations to Investors:

WSJ 2A new study showing that a shrinking fraction of shareholders of U.S. corporations pay taxes on dividends is bolstering a drive to revamp the corporate tax system. [Steven Rosenthal & Lydia Austin, The Dwindling Taxable Share of U.S. Corporate Stock, 151 Tax Notes 923 (May 16, 2016)]

The specter of double taxation, which animates complaints about today’s U.S. corporate tax code, is receding, according to a new study from the Tax Policy Center. Tax-exempt and tax-preferred entities—such as 401(k) plans and other retirement accounts—own more than 75% of U.S. corporate stock, nearly opposite the prevailing pattern from 50 years ago, the study said.

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May 19, 2016 in Congressional News, Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Friday, May 13, 2016

Pew:  America’s Shrinking Middle Class

Pew Research Center, America’s Shrinking Middle Class: A Close Look at Changes Within Metropolitan Areas:

The American middle class is losing ground in metropolitan areas across the country, affecting communities from Boston to Seattle and from Dallas to Milwaukee. From 2000 to 2014 the share of adults living in middle-income households fell in 203 of the 229 U.S. metropolitan areas examined in a new Pew Research Center analysis of government data. ...

Pew 2A

Pew 1A

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May 13, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, May 12, 2016

CBPP:  State Estate Taxes Are A Key Tool For Broad Prosperity

Center on Budget and Policy Priorities, State Estate Taxes: A Key Tool for Broad Prosperity:

As the income gap between the wealthiest Americans and those at the bottom and middle has widened in recent years, many states have eliminated their estate tax ― a key tool for reducing inequality and building broadly shared prosperity.  States that have eliminated their estate tax should reinstate it and those with an estate tax should keep it and, if needed, improve it.

CBPP

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May 12, 2016 in Tax, Think Tank Reports | Permalink | Comments (1)

Mitchell:  The Necessary And Valuable Economic Role Of Tax Havens

Daniel J. Mitchell (Cato Institute), The Necessary and Valuable Economic Role of Tax Havens:

Economists certainly don’t speak with one voice, but there’s a general consensus on two principles of public finance that will lead to a more competitive and prosperous economy.

To be sure, some economists will say that high tax rates and more double taxation are nonetheless okay because they believe there is an “equity vs. efficiency” tradeoff and they are willing to sacrifice some prosperity in hopes of achieving more equality.

I disagree, mostly because there’s compelling evidence that this approach ultimately leads to less income for the poor, but this is a fair and honest debate. Both sides agree that lower rates and less double taxation will produce more growth (though they’ll disagree on how much growth) and both sides agree that a low-tax/faster-growth economy will produce more inequality (though they’ll disagree on whether the goal is to reduce inequality or reduce poverty).

Since I’m on the low-tax/faster-growth side of the debate, this is one of the reasons why I’m a big fan of tax competition and tax havens.

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May 12, 2016 in Tax, Think Tank Reports | Permalink | Comments (2)

Tuesday, May 3, 2016

The Estate Tax Is Destroying The Environment

Estate TaxBrian Seasholes (Reason Foundation), The Ecologically Destructive Tax: How the Federal Estate Tax Is Ecologically Harmful and How to Fix It:

The ongoing debate over the federal estate tax tends to focus on the tax’s economic impacts, such as on small businesses, employment and capital formation, as well as the very small percentage it constitutes of federal tax receipts. Less well known, however, is the significant harm the estate tax does to the ecology of the United States.

Private lands, especially large, intact pieces of land, are critically important to ecological conservation. Conversely, land broken into smaller pieces is generally of less ecological value. Unfortunately, the estate tax results in private land being broken up, subdivided and sold. Over the past several decades it has become increasingly apparent that:

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May 3, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (12)

Tuesday, April 26, 2016

Corporate Integration:  An Important Component Of Tax Reform

Tax Foundation logoScott Greenberg (Tax Foundation), Corporate Integration: An Important Component of Tax Reform:

Corporate integration would not fix all, or even most of the problems with the U.S. business tax system. The United States has one of the highest statutory corporate tax rates in the world, a counter-productive set of rules regarding overseas income, and a cumbersome system of depreciation and cost recovery. Corporate integration would not solve any of these issues.

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April 26, 2016 in Tax, Think Tank Reports | Permalink | Comments (1)

Sunday, April 24, 2016

Today Is Tax Freedom Day — Earlier In MS, TN & LA, Later In CT, NJ & NY

Tax Foundation logoTax Foundation, Tax Freedom Day 2016 is April 24:

  • This year, Tax Freedom Day falls on April 24, or 114 days into the year (excluding Leap Day).
  • Americans will pay $3.3 trillion in federal taxes and $1.6 trillion in state and local taxes, for a total bill of almost $5.0 trillion, or 31 percent of the nation’s income.
  • Tax Freedom Day is one day earlier than last year, due to slightly lower federal tax collections as a proportion of the economy.
  • Americans will collectively spend more on taxes in 2016 than they will on food, clothing, and housing combined.
  • If you include annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur 16 days later, on May 10.
  • Tax Freedom Day is a significant date for taxpayers and lawmakers because it represents how long Americans as a whole have to work in order to pay the nation’s tax burden.

Tax Freedom Day

Center on Budget and Policy Priorities, Tax Foundation Figures Do Not Represent Typical Households’ Tax Burdens; Figures May Mislead Policymakers, Journalists, and the Public:

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April 24, 2016 in Tax, Think Tank Reports | Permalink | Comments (2)

Tuesday, March 22, 2016

The OECD’s Conquest Of The United States: Understanding The Costs And Consequences Of The BEPS Project And Tax Harmonization

Jason J. Fichtner & Adam N. Michel (Mercatus Center, George Mason University), The OECD’s Conquest of the United States: Understanding the Costs and Consequences of the BEPS Project and Tax Harmonization:

The Base Erosion and Profit Shifting (BEPS) Project of the Organisation for Economic Co-operation and Development (OECD) attempts to fundamentally change the international tax system by protecting high-tax states at the expense of economically friendly low-tax states. The OECD is concerned that globalization and increasingly easy movement of capital and labor across borders will undermine the tax bases of its high-tax members. The proposed solution, however, favors consolidated, uniform, and transparent tax rules at the cost of compliance, diminished taxpayer rights, and diminished institutional diversity. Tax policy should remain an area of domestic decision-making, allowing each country to choose a tax system that best fits its unique needs within the global landscape. The international community should be cautious of OECD attempts to eliminate tax competition by consolidating international tax rules. Instead, the United States should lead other countries by reforming its domestic tax code and rejecting many of the BEPS Project’s new rules.

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March 22, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Monday, March 14, 2016

Stiglitz:  Rewriting The Tax Code For A Stronger, More Equitable Economy

Roosevelt LogoJoseph Stiglitz (Columbia), Reforming Taxation to Promote Growth and Equity:

This white paper by Roosevelt Chief Economist Joseph Stiglitz outlines concrete policy measures that can restore equitable and sustainable economic growth in the United States, in the context of the country’s recurring budgetary crises. Effective policies are within our grasp because these budgetary crises are the result of political and not economic failings.

Tax reform in particular offers a path toward both resolving budgetary impasses and making the kinds of public investments that will strengthen the fundamentals of the economy. The most obvious reform is an increase in the top marginal income tax rates—this would both raise needed revenues and soften America’s extreme and harmful inequality. But there are also a variety of other effective possible reforms related to corporate taxation, the estate and inheritance tax, environmental taxes, and ensuring that the government gets full value when it sells public assets. This white paper describes the gravity of the economic situation in the United States, but also shows that there is a way out.

Eric Harris Bernstein (Roosevelt Institute) & Joseph Stiglitz (Columbia), Rewriting the Tax Code for a Stronger, More Equitable Economy:

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March 14, 2016 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Friday, February 26, 2016

Auerbach & Gale:  The Deteriorating Fiscal Outlook

Alan J. Auerbach (UC-Berkeley) & William G. Gale (Tax Policy Center), Once More Unto the Breach: The Deteriorating Fiscal Outlook:

After worsening sharply during the Great Recession, the long-term fiscal outlook generally improved through 2015, due to a combination of legislative acts and lower projected growth of health care spending. The same factors and the slow but steady economic recovery helped reduce short-term deficits over that period, as well.

Over the past year, though, the medium- and long-term fiscal outlooks have deteriorated. Part of this is due to legislative changes, part to changes in economic and technical factors, and a small part to changes in assumptions. This deterioration has happened without much fanfare and, even with a fall in projected interest rates working in the other direction, the estimated changes are large.

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February 26, 2016 in Tax, Think Tank Reports | Permalink | Comments (4)

The Tax Implications Of Immigration Reform: Two Perspectives

Institution on Taxation and Economic Policy, Undocumented Immigrants' State & Local Tax Contributions:

An updated 50-state study ...  finds that undocumented immigrants’ tax contributions would increase significantly under the Obama Administration’s executive actions and even more substantially under comprehensive immigration reform granting  all undocumented immigrants lawful permanent residence.

The 11 million undocumented immigrants currently living in the United States collectively paid $11.64 billion in state and local taxes.  ITEP’s analysis finds their combined nationwide state and local tax contributions would increase by $805 million under full implementation of the administration’s 2012 and 2014 executive actions and by $2.1 billion under comprehensive immigration reform.

Federation for American Immigration Reform, The Fiscal Burden of Illegal Immigration on United States Taxpayers:

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February 26, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

How Shady Tax Treaties Are Fueling Inequality and Poverty

MistreatedAction Aid, Mistreated: How Shady Tax Treaties are Fueling Inequality and Poverty:

Right now, stretching across the world is a web of tax agreements between governments. They may not seem like the frontline in the fight against inequality and poverty, but today ActionAid shows how crucial they are for ordinary people everywhere.

Our report, ‘Mistreated’, shows how tax treaties are reducing the tax that some of the world’s poorest countries can collect from  multinational companies.

Measuring Tax Treaty Negotiation Outcomes: The ActionAid Tax Treaties Dataset:

This paper introduces a new dataset that codes the content of 519 tax treaties signed by low- and lower-middle-income countries in Africa and Asia. Often called Double Taxation Agreements, bilateral tax treaties divide up the right to tax cross-border economic activity between their two signatories. When one of the signatories is a developing country that is predominantly a recipient of foreign investment, the effect of the tax treaty is to impose constraints on its ability to tax inward investors, ostensibly to encourage more investment.

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February 26, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, January 28, 2016

Tax Rates, Tax Reform And Tax Revenues

Alan Reynolds (Cato Institute), Tax Rates, Tax Reform and Tax Revenues: Part One:

As the graph shows, the U.S. has had considerable experience with top tax rates as high as 91-92%, as low as 28%, and everything in between. The individual income tax averaged 7.7% of GDP since 1946.

Top Tax Rates and Revenues as % of GDP

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January 28, 2016 in Tax, Think Tank Reports | Permalink | Comments (0)