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Wednesday, October 29, 2014

2015 Business Tax Climate: Chilliest in Blue States

Tax Foundation logoThe Tax Foundation yesterday released the 2015 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

Iowa

2

South Dakota

42

Connecticut

3

Nevada

43

Wisconsin

4

Alaska

44

Ohio

5

Florida

45

Rhode Island

6

Montana

46

Vermont

7

New Hampshire

47

Minnesota

8

Indiana

48

California

9

Utah

49

New York

10

Texas

50

New Jersey

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

Tax Foundation

October 29, 2014 in Tax, Think Tank Reports | Permalink | Comments (6)

Tuesday, September 16, 2014

U.S. Ranks 32nd (out of 34 OECD Countries) in International Tax Competitiveness

Tax Foundation, 2014 International Tax Competitiveness Index:

Tax Foundation logoThe Tax Foundation’s International Tax Competitiveness Index (ITCI) measures the degree to which the 34 OECD countries’ tax systems promote competitiveness through low tax burdens on business investment and neutrality through a well-structured tax code. The ITCI considers more than forty variables across five categories: Corporate Taxes, Consumption Taxes, Property Taxes, Individual Taxes, and International Tax Rules. The ITCI attempts to display not only which countries provide the best tax environment for investment but also the best tax environment to start and grow a business.

Tax Foundation

Wall Street Journal editorial, We're Number 32! A New Global Index Highlights the Harm From the U.S. Tax Code.:

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September 16, 2014 in Tax, Think Tank Reports | Permalink | Comments (7)

Friday, September 12, 2014

Hungerford: Policy Responses to Corporate Inversions

Thomas L. Hungerford (Economic Policy Institute), Policy Responses to Corporate Inversions; Close the Barn Door Before the Horse Bolts:

This report examines some of the issues and policy options regarding corporate inversions. It explains what corporate inversions are, explores common tax features of proposed inversions, analyzes why many corporations are now pursuing inversions, and assesses various policy options to prevent inversions. The report’s main conclusions are:

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September 12, 2014 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Sunday, September 7, 2014

The Tax Foundation and Ed Kleinbard Debate the Impact of Inversions on the Corporate Tax Base

Scott Hodge (President, Tax Foundation), IRS Data Contradicts Kleinbard’s Warnings of Earnings Stripping from Inversions:

Tax Foundation logoOne of the loudest critics of the recent wave of corporate inversions is University of Southern California law professor Ed Kleinbard, who warns that these transactions will erode the U.S. corporate tax base because these newly relocated firms will use “intragroup interest payments” to “strip” income out of their U.S. subsidiary.  ['Competitiveness' Has Nothing to Do With It, 144 Tax Notes 1055 (Sept. 1, 2014)]

While this is thought to be a common practice with multinational corporations, IRS data actually shows that the U.S. subsidiaries of foreign-based companies have smaller interest deductions relative to their total receipts than do American-headquartered firms and, interestingly, they have higher effective tax rates than their domestic counterparts. Thus, Kleinbard’s warnings would seem to be much ado about nothing. ...

Tax Foundation 1

 Tax Foundation 2

Of course, the real threat to the U.S. corporate tax base is our corporate tax code itself, with the third-highest overall rate in the world and a worldwide system that requires American companies to pay a toll charge to bring their profits back home. Thus, the solution to the inversion “problem” is to dramatically cut the corporate rate and to move to a territorial tax system, not add even more unnecessary rules to an already complicated tax code.

Edward Kleinbard (USC):

KleinbardPaul Caron has kindly given me an opportunity to respond to the Tax Foundation’s blog post, IRS Data Contradicts Kleinbard’s Warnings of Earnings Stripping from Inversion, authored by Scott Hodge. The data and relevant research in fact point in exactly the opposite direction as that suggested by the Tax Foundation in this post.

First, it should be obvious that inversions have been relatively rare transactions for the last decade, until the current wave of inversion mania infected Wall Street firms, and through that vector the larger corporate community. At the same time, genuinely foreign-controlled U.S. firms are a very large part of the U.S. domestic economy — holding roughly 20 percent of U.S. corporate assets, for example. This means that IRS Statistics of Information (SOI) data in general are insufficiently granular (to borrow a useful turn of phrase from the blog post) to shed much light on post-inversion tax planning. But we have a great deal of other information, in the form of Wall Street analyst reports, practice-oriented advisories, financial news reporting, and similar sources, all of which identify earnings stripping as one important objective in some current inversion trades. (Very generally, trades now or recently in the market lean primarily towards either the earnings stripping or the section 956 hopscotch strategies — one of the two dominates the other.) In short, the past is a poor predictor of future tax avoidance strategies in respect of the highly tax-motivated acquisition structures now in the marketplace.

But let’s persevere, as the blog post did not find this first observation disabling to its ability to mine for data to support its conclusion. The basic idea of the blog post was to take SOI data on all active U.S. corporations, and subtract out from those figures the corresponding numbers for foreign-controlled U.S. firms. The remainder was assumed to represent the results of domestic-controlled domestic corporations. I have no objections to that (other than to repeat that inversion transactions will not be visible in this data, where the numbers in some case are in the trillions of dollars). But the blog post then made two unstated modeling decisions that colored the results.

First, the blog post muddled data drawn from both financial and non-financial firms. Everyone who works with aggregate financial or tax data knows not to do that, because the two have radically different capital structures and regulatory environments. (In turn the insurance and non-insurance segments of the financial services industries have very different capital structures when compared to each other, because the liabilities on an insurance company’s balance sheet represented by current or future insurance claims against the company are non-interest bearing.) Financial services firms of course account for a very substantial percentage of corporate gross assets, liabilities, and interest expense. I am not aware of any financial services firm engaging in an inversion transaction. Following general practice in tax analysis, then, the blog post should have parsed its data one more level down, to compare foreign-controlled U.S. non-financial firms to domestic-controlled U.S. non-financial firms.

Second, the blog post compares interest expense to total receipts. But as anyone who has worked on foreign tax credit planning questions knows, interest expense does not support revenues, it supports assets. That is, you borrow money to buy stuff, not to buy free-floating revenues. So the relevant question is, how do the interest-to-assets ratios of foreign-controlled and domestic-controlled non-financial U.S. firms compare?

I do not run a tax think tank and so do not have a computer set up with the last 20 years or so of SOI data, but I did look at this question for 2011 (the most recent year for which data are available). Oddly enough, when you ask the right question, you discover that the 2011 interest-to-assets ratio for foreign-controlled non-financial U.S. firms is a bit higher, not lower, than the comparable ratio for domestic-controlled non-financial firms. Foreign-controlled firms are incurring a bit more interest cost per dollar of assets supported by the underlying borrowings.

And of course one can use the same approach to get a peek at larger earnings stripping and expense stuffing activities, by looking at the same SOI spreadsheets’ taxable income (formally, "income subject to tax”) entries. When you do, you discover that in 2011 domestic-controlled U.S. non-financial firms earned about 2.4 percent in “income subject to tax” on their gross assets. Foreign-controlled non-financial firms, by contrast, earned about 1.9 percent. You can claim that this is because all foreign investments are young and fresh, and therefore still in an expansionary mode, while domestic-controlled firms are old and tired, just collecting an annuity, but this excuse is belied by reality (e.g, Silicon Valley firms), and has grown tiresome after so many decades of use.

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September 7, 2014 in Tax, Think Tank Reports | Permalink | Comments (1)

Tuesday, September 2, 2014

Tax Foundation: Burger King and Corporate Tax Rates and Revenues

Tax Foundation:  Canada's Lower Corporate Tax Rate Raises More Tax Revenue:

Tax Foundation logoCanada is apparently becoming an attractive place to do business. This week Burger King announced plans to move its headquarters to Canada, via a merger with Tim Hortons. Other U.S. companies that have recently moved or announced plans to move to Canada include Bausch and Lomb, Allergan, and Auxilium. A Bloomberg analysis indicates Tim Hortons was once a U.S. company, until it inverted to Canada in 2009.

Part of the attraction is the substantial tax reforms that occurred over the last 15 years in Canada. First among these is the dramatic reduction in the corporate tax rate, from 43 percent in 2000 to 26 percent today. The U.S. currently has a corporate tax rate of 39 percent, but lawmakers are reluctant to do what Canada did, i.e. lower the tax rate, for fear of losing tax revenue.

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September 2, 2014 in Tax, Think Tank Reports | Permalink | Comments (3)

Wednesday, August 20, 2014

Which States Give You the Biggest Bang For Your Buck?

Wednesday, July 9, 2014

CTJ: Addressing the Need for More Federal Revenue

Citizens for Tax Justice, Addressing the Need for More Federal Revenue:

CTJAmerica is undertaxed, and the result is underfunding of public investments that would improve our economy and the overall welfare of Americans. Fortunately, Congress has several straightforward policy options to raise revenue, mostly by closing or limiting loopholes and special subsidies imbedded in the tax code that benefit wealthy individuals and profitable businesses.

Part I of this report explains why Congress needs to raise the overall amount of federal revenue collected. Contrary to many politicians’ claims, the United States is much less taxed than other countries, and wealthy individuals and corporations are particularly undertaxed. This means that lawmakers should eschew enacting laws that reduce revenue (including the temporary tax breaks that Congress extends every couple of years), and they should proactively enact new legislation that increases revenue available for public investments. Parts II, III, and IV of this report describe several policy options that would accomplish this. This information is summarized in the table to the right.

Even when lawmakers agree that the tax code should be changed, they often disagree about how much change is necessary. Some lawmakers oppose altering one or two provisions in the tax code, advocating instead for Congress to enact such changes as part of a sweeping reform that overhauls the entire tax system. Others regard sweeping reform as too politically difficult and want Congress to instead look for small reforms that raise whatever revenue is necessary to fund given initiatives.

The table to the right illustrates options that are compatible with both approaches. Under each of the three categories of reforms, some provisions are significant, meaning they are likely to happen only as part of a comprehensive tax reform or another major piece of legislation. Others are less significant, would raise a relatively small amount of revenue, and could be enacted in isolation to offset the costs of increased investment in (for example) infrastructure, nutrition, health or education.

For example, in the category of reforms affecting high-income individuals, Congress could raise $613 billion over 10 years by eliminating an enormous break in the personal income tax for capital gains income. This tax break allows wealthy investors like Warren Buffett to pay taxes at lower effective rates than many middle-class people. Or Congress could raise just $17 billion by addressing a loophole that allows wealthy fund managers like Mitt Romney to characterize the “carried interest” they earn as “capital gains.” Or Congress could raise $25 billion over ten years by closing a loophole used by Newt Gingrich and John Edwards to characterize some of their earned income as unearned income to avoid payroll taxes.  

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July 9, 2014 in Tax, Think Tank Reports | Permalink | Comments (15)

Tuesday, July 1, 2014

Bernstein: Why the GOP Really Wants to Defund IRS

Washington Post op-ed:  Why the GOP Really Wants to Defund IRS, by Jared Bernstein:

In one of the great D.C. key-dangles (“look over here, not over there!”), congressional conservatives have everyone looking the other way while they try to defund the Internal Revenue Service. No question, recent IRS screw-ups are feeding right into their opponents’ plans. But let’s not lose sight of what’s really going on here: This is just a different way to try to shrink government, accommodate tax evasion and even undermine the implementation of health reform. ...

To collect taxes, we need an amply funded IRS, and therein lies the real scandal. The details are in this new Center on Budget and Policy Priorities paper by Chuck Marr and Joel Friedman, who document “…significant cuts that have occurred in IRS funding, which remains well below its 2010 level…. The cuts have led the IRS to reduce its workforce, severely scale back employee training, and delay much-needed upgrades to information technology systems. These steps, in turn, have weakened the IRS’s ability to enforce the nation’s tax laws and serve taxpayers efficiently.” ...

Marr and Friedman identify these additional facts of the real case:

  • The figures below show a 14 percent fall in the agency’s inflation-adjusted budget (figure 1) along with an 11 percent decline in its staffing levels (figure 2), 2010-2014. IRS staff assigned specifically to enforcement is down 15 percent.

Bernstein_IRS_combo

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July 1, 2014 in IRS News, Tax, Think Tank Reports | Permalink | Comments (7)

Friday, June 27, 2014

Wealth Levels, Wealth Inequality, and the Great Recession

Sunday, June 15, 2014

Walgreens' Planned Move From Illinois to Switzerland Would Save $4 Billion in Taxes

Americans for Tax Fairness, Offshoring America’s Drugstore Walgreens May Move its Corporate Address to a Tax Haven to Avoid Paying Billions in U.S. Taxes:

WalgreensWalgreens could cost taxpayers $4 billion in lost revenue over five years should the company decide to renounce its American corporate legal status and move its official address to Switzerland, a tax haven. The company is widely reported to be considering this move and says it will announce its intentions as soon as this summer. Walgreens is the nation’s largest pharmacy retailer with 8,200 stores and locations in all 50 states.

June 15, 2014 in Tax, Think Tank Reports | Permalink | Comments (10)

Saturday, June 7, 2014

The Use of Offshore Tax Havens by Fortune 500 Companies

New York Times:  The Islands Treasured by Offshore Tax Avoiders, by Floyd Norris:

NYTDid you know that United States companies earned $129 billion in 2010 in three small groups of islands?

That is what they told the IRS they earned in Bermuda, the Cayman Islands and the British Virgin Islands. ...

Assuming you believe those figures, the productivity of workers in those countries is amazing. On average, United States companies had profits of $873,611 per person living in those islands.

By contrast, those same companies reported earning $12.6 billion in China, a country with 1.36 billion people. On a per capita basis, that comes to a little more than $9 a person.

Of course, those numbers are nonsense. The United States income tax laws allow companies to claim they earned profits in countries where they actually had few, if any, operations, but where taxes are extremely low.

A report this week by two groups upset about the low effective income tax rate for corporations, the U.S. Public Interest Research Group Education Fund and Citizens for Tax Justice, said that 372 of the companies in the Fortune 500 — generally the 500 United States companies with the highest revenues — reported a total of 7,827 subsidiaries in countries that the groups view as tax havens [Offshore Shell Games 2014:The Use of Offshore Tax Havens by Fortune 500 Companies].

(Hat Tip: Mike Talbert.)

June 7, 2014 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (1)

Monday, April 21, 2014

TRAC-IRS Releases Tax Enforcement Data

Today Is Tax Freedom Day -- Earlier in LA, MS & SD, Later in CT, NJ & NY

Tax Foundation logoToday is Tax Freedom Day, the day on which Americans will have earned enough money to pay all federal, state, and local taxes for the year:

Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for year. A vivid, calendar-based illustration of the cost of government, Tax Freedom Day divides all federal, state, and local taxes by the nation’s income. In 2014, Americans will pay $3.0 trillion in federal taxes and $1.5 trillion in state taxes, for a total tax bill of $4.5 trillion, or 30.2 percent of income. This year, Tax Freedom Day falls on April 21, or 111 days into the year. Tax Freedom Day is three days later than last year due mainly to the country’s continued slow economic recovery, which is expected to boost tax revenue especially from the corporate, payroll, and individual income tax.

The total tax burden borne by residents of different states varies considerably due to differing state tax policies and because of the progressivity of the federal tax system. This means a combination of higher-income and higher-tax states celebrate Tax Freedom Day later: Connecticut (May 9), New Jersey (May 9), and New York (May 4). Residents of Louisiana will bear the lowest average tax burden in 2014, with Tax Freedom Day arriving for them on March 30. Also early are Mississippi (April 2) and South Dakota (April 4).

  Map

The Center on Budget and Policy Priorities criticizes the Tax Foundation's methodology here.

April 21, 2014 in Tax, Think Tank Reports | Permalink | Comments (0)

Tuesday, April 8, 2014

Toder & Viard: A Call for Structural Reform of the U.S. Corporate Income Tax

Eric Toder (Tax Policy Center) & Alan D. Viard (American Enterprise Institute), Major Surgery Needed: A Call for Structural Reform of the U.S. Corporate Income Tax:

Corporate tax system flaws are amplified by the high US statutory tax rate. Here are two ways to fix it:

  1. Eliminate corporate income tax, but tax US shareholders at ordinary income tax rates on their dividends and accrued capital gains.
  2. Seek international agreement on allocating income of multinational corporations among countries to determine tax obligation.

April 8, 2014 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Monday, February 24, 2014

TRAC-IRS: The Decline of the District Court as a Tax Litigation Forum

The Transactional Records Access Clearinghouse at Syracuse University has released a report, Tax Lawsuits Edge Downward:

TRAC 2The latest available data from the federal courts show that during January 2014 the government reported 68 new civil filings under the category of "Taxes." According to the case-by-case information analyzed by the Transactional Records Access Clearinghouse (TRAC), this number represents a decline of nearly 10 percent from one year ago. Tax lawsuits have declined a total of 32.4 percent from the levels reported five years ago in January 2009. The January 2014 figure is however up 9.7 percent over the previous month, when the number of civil filings of this type totaled 62.

The comparisons of the number of civil filings for tax lawsuits are based on case-by-case court records which were compiled and analyzed by TRAC (see Table 1). Note that the cases covered by this report exclude suits dealing with summonses on third-party witnesses under 26 USC 7609.

  TRAC

February 24, 2014 in Tax, Think Tank Reports | Permalink | Comments (2)

Tuesday, January 28, 2014

Official Statistics on Inequality, the Top 1%, and Redistribution

Tax Foundation logoTax Foundation, Official Statistics on Inequality, the Top 1%, and Redistribution:

President Obama will reportedly focus much of his State of the Union speech on addressing inequality and mobility in America. Undoubtedly, these issues will generate a considerable amount of rhetoric by pundits and politicians on both sides of the aisle in the days ahead. Much of this rhetoric will not be supported by data or facts.

In order to bolster this discussion with data, we’ve summarized some of the recent work done on inequality and mobility by the Congressional Budget Office and the IRS. Links are provided to the original source material.

Inequality: CBO data shows that inequality today is slightly higher than the average of the past thirty years, but less that it was during the last two years of the Clinton administration.

 

Progressivity:  According to the CBO’s progressivity index, the federal tax code is as progressive today as it has been at any time during the past thirty years.

 

The Top 1%:  The Top 1% continues to pay a larger share of the federal income tax burden than the bottom 90 percent combined.

 

Redistribution:  Using 2006 data, CBO found that tax and spending policies combined to redistribute $1.2 trillion in income from the top 40 percent of non-elderly households to the bottom 60 percent of non-elderly households.

 

Mobility:  IRS panel data that tracked the same group of taxpayers between 1999 and 2007 showed that Americans can move from one economic group to another fairly quickly.

More than 50% of Taxpayers Moved Out of the Bottom Quintile Between 1999 & 2007

1999 Income Quintile/Percentile

2007 Income Quintile/Percentile

Lowest

Second

Third

Fourth

Fifth

Total

Lowest

42.5%

25.1%

16.3%

10.4%

5.7%

100.0%

Second

32.2%

34.7%

17.3%

10.8%

5.0%

100.0%

Third

14.4%

26.0%

32.8%

17.8%

8.9%

100.0%

Fourth

7.7%

10.7%

25.7%

37.7%

18.3%

100.0%

Fifth

3.1%

3.8%

7.5%

23.3%

62.3%

100.0%

Tax Foundation calculations based on IRS data from the 1999-2007 SOI Individual Tax Panel.

January 28, 2014 in Tax, Think Tank Reports | Permalink | Comments (2)

Thursday, December 19, 2013

Unmasking the Mortgage Interest Deduction

MortgageReason Foundation, Unmasking the Mortgage Interest Deduction: Who Benefits and by How Much?:

The deduction of mortgage interest from federal income taxes subsidizes homeownership, making it more affordable to become a homeowner. It is a highly popular tax break, yet one that is not without criticism. For example, the mortgage interest deduction (MID) primarily benefits those who would choose to own homes anyway while encouraging them to simply buy bigger and more expensive homes. Those who are on the margin between renting and owning tend not to itemize deductions, thus they cannot benefit from the MID. As a result, if the goal is to increase the homeownership rate, the MID is an ineffective tool. Furthermore, it creates a distortion in the choice between financing owner-occupied housing with debt or other assets, and in the choice between investing in residential real estate or other assets.

Despite its popularity among voters, the mortgage interest deduction has long been a target for elimination. Most recently, President Obama’s deficit reduction commission (Simpson-Bowles) had it in its sights. While there is general sentiment among voters that the mortgage interest deduction is a good idea, there is little understanding of its effects. In order to understand the potential effect of closing this loophole, this study examines specifically who benefits from the MID and how much they benefit. It also provides an estimate of how much tax rates could be reduced if the deduction were eliminated but revenues were held constant.

Chart

December 19, 2013 in Tax, Think Tank Reports | Permalink | Comments (0)

Tuesday, December 17, 2013

Bernstein: The Impact of Inequality on Growth

Jared Bernstein (Center on Budget and Policy Priorities), The Impact of Inequality on Growth:

InequalityThere are numerous reasons for policymakers and citizens to be concerned about the rise of inequality, not the least of which are its impact on the basic American social contract that says that work pays off; the diminishing of opportunity; the rise in societal unrest; and its impact on political functionality. But the concern of this paper is the impact of inequality on macroeconomic growth.

The review of the evidence suggests that while some of the traditional channels by which inequality affects growth have solid theoretical backing, empirical evidence is elusive. Intuitive and historically verified growth-accounting methods predict that if inequality, through its impact on diminished educational opportunity, leads to a less-well-educated workforce against a counterfactual with less inequality, growth will be diminished. But for a number of reasons stated in the text, there is no correlation, even with the requisite lags between trends in inequality and trends in labor quality.

December 17, 2013 in Scholarship, Tax, Think Tank Reports | Permalink | Comments (0)

Saturday, November 30, 2013

Nearly Half of All Taxpayers Are Over 45

The Tax Foundation:  Nearly Half of All Taxpayers Are Over 45:

Tax Foundation

November 30, 2013 in Tax, Think Tank Reports | Permalink | Comments (4)

Saturday, November 9, 2013

Implications of a Switch to a Territorial Tax System

BRGBerkeley Research Group, Implications of a Switch to a Territorial Tax System in the United States: A Critical Comparison to the Current System:

Berkeley Research Group released a new report today that examines the likely effects of a change in the U.S. corporate tax system from the current worldwide approach to a territorial approach similar to those used by other developed countries. ... The report finds that a switch to a territorial tax system would increase the repatriation of foreign earnings by U.S. multinational companies, generate economic growth and jobs in the United States, enhance the international competitiveness of many U.S. companies, and increase corporate tax revenues, at least in the short run.

(Hat Tip: Bruce Bartlett.)

November 9, 2013 in Tax, Think Tank Reports | Permalink | Comments (3)

Saturday, October 5, 2013

The IRS Scandal, Day 149

IRS Logo 2

Heritage Foundation:  Protecting the First Amendment from the IRS, by Hans A. von Spakovsky (Senior Legal Fellow, Heritage Foundation; Former Member, Federal Election Commission):

The targeting of conservative citizen organizations by the IRS should concern every American. As one of the most powerful federal agencies, the IRS can devastate associations of like-minded individuals, such as nonprofit Tea Party groups, that form a fundamental part of America’s political culture. Citizens use these groups not only to assert their views and opinions under the protection of the First Amendment, but also to advance the social welfare of the country. Government employees who willfully violate the tax code to retaliate against First Amendment–protected expression and activity should lose their jobs—at the very least—and federal law governing tax applications and returns should be strengthened by making IRS auditors personally liable for First Amendment–type violations and clarifying and simplifying the rules governing exemptions. 

Prior TaxProf Blog coverage:

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October 5, 2013 in IRS News, IRS Scandal, Tax, Think Tank Reports | Permalink | Comments (2)

Tuesday, September 24, 2013

CTJ: Tax Reform Goals: Raise Revenue, Enhance Fairness, End Offshore Shelters

CTJ Logo (2013)Citizens for Tax Justice, Tax Reform Goals: Raise Revenue, Enhance Fairness, End Offshore Shelters

Most Americans and politicians probably like the idea of “tax reform,” but not everyone agrees on what “tax reform” means. If Congress is going to spend time on a comprehensive overhaul of America’s tax system, this overhaul should raise revenue, make our tax system more progressive, and end the breaks that encourage large corporations to shift their profits and even jobs offshore.

Tax measures before Congress generally begin as proposals before the House Ways and Means Committee, and the current chairman, Dave Camp of Michigan, has defined tax reform as a process by which Congress would lower tax rates on corporations and wealthy individuals and then offset the cost by eliminating or reducing “tax expenditures” (subsidies provided through the tax code) so that the net result is no increase in revenue. Camp argues that the goals of tax reform should be to make the tax code simpler and to make American companies more “competitive,” although neither of these vague terms addresses the greatest problems with our tax system.

CTJ

September 24, 2013 in Tax, Think Tank Reports | Permalink | Comments (5)

Tuesday, September 3, 2013

CBPP: Ten Estate Tax Myths and Realities

CBPP Logo (2013)Center on Budget and Policy Priorities:  10 Myths and Realities About the Estate Tax (Aug. 29, 2013):

The estate tax is a tax on property (cash, real estate, stock, or other assets) transferred from deceased persons to their heirs. Only the wealthiest estates in the country pay the tax because it is levied only on the portion of an estate’s value that exceeds a specified exemption level, currently $5.25 million per person (effectively $10.5 million per married couple). The estate tax thus limits, to a modest degree, the large tax breaks that extremely wealthy households get on their wealth as it grows, which can otherwise go completely untaxed. Though the estate tax has been an important source of federal revenue for nearly a century, a number of myths continue to surround it:

  1. The estate tax is best characterized as the “death tax"
  2. The estate tax forces estates to turn over half of their assets to the government
  3. Weakening the estate tax wouldn’t significantly worsen the deficit because the tax doesn’t raise much revenue
  4. The cost of complying with the estate tax nearly equals the amount of revenue the tax raises
  5. Many small, family-owned farms and businesses must be liquidated to pay estate taxes
  6. The estate tax constitutes “double taxation” because it applies to assets that already have been taxed once as income
  7. If policymakers decide to retain the estate tax, the logical top rate would be 20%, the same as the capital gains rate
  8. Eliminating the estate tax would encourage people to save and thereby make more capital available for investment
  9. The United States taxes estates more heavily than do other countries
  10. The estate tax unfairly punishes success

September 3, 2013 in Tax, Think Tank Reports | Permalink | Comments (1)

Friday, August 30, 2013

The 47 Percent Is Now the 43 Percent

Tuesday, August 27, 2013

A Brief History of Tax Expenditures

Tax Foundation logoThe Tax Foundation:  A Brief History of Tax Expenditures, by William McBride:

The concept of “tax expenditures” began in the 1960s when Assistant Secretary of the Treasury Stanley Surrey noted that many tax preferences resemble spending. Congress mandated in 1974 that these tax expenditures be recorded annually as part of the federal budget. Since the birth of the concept, tax expenditures have been defined as the deductions, credits, exclusions, exemptions, and other tax preferences that represent departures from a “normal” tax code. As we will see, “normal” is in the eye of the beholder, and the two government agencies responsible for tracking tax expenditures, Treasury and the Joint Committee on Taxation (JCT), often provide different answers when asked what is “normal.” However, the two agencies’ methods are largely consistent with each other from year to year. Thus, the annual tax expenditure reports produced during the budgeting process reveal something about how the tax code has changed over the years and provide some guidance for tax reform.[3]

Attempts to reduce tax expenditures have not been met with great success. The Tax Reform Act of 1986 did not significantly reduce the number of tax expenditures, though it did reduce their real dollar value by about one-third. However, beginning in the mid- to late 1990s, numerous tax expenditures were added, expanded, or otherwise allowed to grow. Today, the tax expenditure budget is $1.2 trillion, which represents real dollar growth of 44 percent since 1986 and 96 percent growth since 1991 when tax expenditures were at their lowest. All of the growth has been in the individual tax code, with about two-thirds of real dollar growth coming from just three provisions: the earned income tax credit, the child credit, and the exclusion for employer-provided healthcare. Corporate tax expenditures have actually declined since 1986 in real dollar terms such that their share of the tax expenditure budget is now about 9 percent, half of what it was in 1986.

Expends

August 27, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Wednesday, August 14, 2013

Growth in State Tax Collections, 2001-2011

Friday, August 2, 2013

Viard: Capital Income Taxation: Reframing the Debate

AEI LogoAlan D. Viard (American Enterprise Institute), Capital Income Taxation: Reframing the Debate:

Although capital income taxes penalize saving and slow long-run growth, the federal tax system imposes multiple such taxes. Seven increases in capital income taxes took effect at the beginning of 2013, and President Obama’s 2014 budget plan proposes further increases. In upcoming decades, rising revenue needs fueled by entitlement growth will create pressure to further expand capital income taxation despite its negative economic effects. Opponents of capital income taxation must reframe the policy debate by explaining the economic disadvantages of capital income taxes and proposing alternative budgetary measures that maintain tax fairness.

August 2, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Monday, July 29, 2013

CTJ: Reforming Individual Income Tax Expenditures

Citizens for Tax Justice, Reforming Individual Income Tax Expenditures: Congress Should End the Most Regressive Ones, Maintain the Progressive Ones, and Reform the Rest to Be More Progressive and Better Achieve Policy Goals:

To restore funding for public investments, Congress should enact a tax reform that reduces tax expenditures (subsidies provided through the tax code) to raise revenue. Some lawmakers have debated whether or not revenue saved from reducing tax expenditures should be used to reduce tax rates rather than finance needed public investments, an issue that has been addressed in previous CTJ reports. Less attention has been given to how Congress should prioritize which tax expenditures should be limited or reformed. This is particularly true of tax expenditures for individuals. (A future CTJ report will address tax expenditures for businesses.) 

Tax expenditures can be evaluated based on three criteria: cost, progressivity and effectiveness in achieving non-tax policy goals. This report takes cost into account by focusing on the ten most costly tax expenditures for individuals, illustrated in the bar graph on the following page. This report evaluates these tax expenditures based on progressivity and effectiveness in achieving non-tax policy goals — which include subsidizing home ownership and encouraging charitable giving, increasing investment, encouraging work, and many other stated goals. Based on data from Congressional Budget Office (CBO) and from the Institute on Taxation and Economic Policy (ITEP), this report

  1. Tax expenditures that take the form of breaks for investment income (capital gains and stock dividends) are the most regressive and least effective in achieving their stated policy goals, and therefore should be repealed.
  2. Tax expenditures that take the form of refundable credits based on earnings, like the Earned Income Tax Credit (EITC) and the Child Tax Credit, are progressive and achieve their other main policy goal (encouraging work) and therefore should be preserved.
  3. Tax expenditures that take the form of itemized deductions are regressive and have mixed results in achieving their policy goals, and therefore should be reformed.
  4. Tax expenditures that take the form of exclusions for some forms of compensation from taxable income (like the exclusion of employer-provided health insurance and pension contributions) are not particularly regressive and have some success in achieving their policy goals, and therefore should be generally preserved.

CTJ

This report draws partly on recent data from the Congressional Budget Office on the ten largest tax expenditures affecting individuals, which CBO concludes will cost more than $900 billion in 2013 and make up two-thirds of the cost of all federal tax expenditures. The graph above illustrates the revenue foregone in 2013 for each of the top ten tax expenditures for individuals in 2013.

These revenue amounts do not necessarily indicate how much would be raised by repealing one or more of these tax expenditures. (This is because people may respond to the repeal of one tax break by utilizing another more heavily or changing their behavior in other ways.) Nonetheless, these figures are useful for comparing the relative importance of tax expenditures.

July 29, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Saturday, July 13, 2013

CBPP: The Problem With Deficit-Neutral Tax Reform

CBPPCenter on Budget and Policy Priorities, The Problem With Deficit-Neutral Tax Reform, by Chuck Marr, Chye-Ching Huang & Nathaniel Frentz:

Given the nation’s long-term fiscal pressures, increases in revenues need to make a significant contribution to deficit reduction, alongside reductions in spending for mandatory programs.  Deficit-neutral tax reform would, as a result, be highly problematic.

Continue reading

July 13, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Thursday, July 11, 2013

TPC: Evaluating Broad-Based Approaches for Limiting Tax Expenditures

Tax Policy Center LogoTax Policy Center: Evaluating Broad-Based Approaches for Limiting Tax Expenditures, by Eric Toder, Joseph Rosenberg & Amanda Eng:

This paper evaluates six options to achieve across-the-board reductions to a group of major exclusions and deductions in the income tax: (1) limiting their tax benefit to a maximum percentage of income, (2) imposing a fixed dollar cap, (3) reducing them by fixed-percentage amount, (4) limiting their tax saving to a maximum percentage of their dollar value, (5) replacing them with fixed rate refundable credits, and (6) including them in the base of the existing Alternative Minimum Tax (AMT). We discuss issues of design, implementation, and administration, and simulate the revenue, distributional, and incentive effects of the various options.

July 11, 2013 in Tax, Think Tank Reports | Permalink | Comments (1) | TrackBack (0)

Wednesday, July 10, 2013

ITEP: Immigration Reform Would Increase State Tax Revenues By $2 Billion Per Year

ITEPInstitute on Taxation and Economic Policy, Undocumented Immigrants’ State and Local Tax Contributions:

The potential fiscal costs of legalizing undocumented immigrants have been central to the immigration reform debate. This report contributes the most reliable figures available about the potential benefits to state governments, showing that the 11.2 million undocumented immigrants living in the United States are already paying a significant share of their income in state and local taxes, and that figure would rise under immigration reform.

A report from the non-partisan Congressional Budget Office (CBO) estimated the impact the immigration bill passed in the Senate would have at the federal level and found that it would decrease the deficit and generate more than $450 billion in additional federal revenue over the next decade.

This report provides state-by-state estimates of the state and local tax contributions of the 11.2 million undocumented immigrants living in the United States.

The key findings are:

  • Undocumented immigrants currently contribute significantly to state and local taxes, collectively paying an estimated $10.6 billion in 2010 with contributions ranging from less than $2 million in Montana to more than $2.2 billion in California. This means these families are likely paying about 6.4 percent on average of their income in state and local taxes.
  • Allowing undocumented immigrants to work in the United States legally would increase their state and local tax contributions by an estimated $2 billion a year. Their effective state and local tax rate would also increase to 7 percent on average, which would put their tax contributions more in line with documented taxpayers with similar incomes.

July 10, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Saturday, July 6, 2013

State & Local Taxes & Fees on Wireless Service: Highest in NE, WA (19%), Lowest in ID, OR, NV (2%)

Saturday, June 29, 2013

Brookings Program on Evaluating the Homebuyer Tax Credit

BrookingsThe Brookings Institution hoasted a program yesterday on Tools for Supporting the Housing Market: Evaluating the Homebuyer Tax Credit and Other Policies:

After the bursting of the home price bubble in the mid-2000s sent the housing market into a downward spiral, the government introduced a variety of new measures aimed at sustaining the flow of mortgage credit and boosting housing demand. One such measure was a program that provided a tax credit to homebuyers of up to $8,000. Although advocates of the program argued that it was a critical tool for absorbing excess inventories, critics complained that it simply accelerated sales that would have occurred anyway. Other measures aimed at stabilizing the housing market included various foreclosure prevention and mitigation initiatives, programs that facilitated refinancing, and the Federal Reserve’s considerable efforts to reduce interest rates.

With several years of experience of these policies now behind us, it is time to take stock of their effects. Establishing a better understanding of how they worked will help us learn what tools to use to combat future episodes of housing market distress and what measures the government should have in place now to encourage the nascent housing market recovery that has emerged over the past year.

Co-Directors of Economic Studies Karen Dynan and Ted Gayer presented a new paper on the impact of the federal and state homebuyer tax credits [An Evaluation of Federal and State Homebuyer Tax Incentives (Presentation]. A panel discussion followed to discuss how it compared to other government efforts to help the housing market:

  • William G. Gale (Co-Director, Urban-Brookings Tax Policy Center) (moderator)
  • Ed Brady (National Association of Home Builders)
  • Jonathan Hanks (Sr. Vice President and COO, Utah Housing Corporation)
  • Jed Kolko (Chief Economist and Vice President of Analytics, Trulia)
  • Christopher J. Mayer (Professor, Columbia Business School)

June 29, 2013 in Conferences, Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Percentage of Each State's Federal Tax Returns Filed Jointly

Sunday, June 23, 2013

Federal Aid as a Percentage of State General Revenue

Wednesday, June 19, 2013

Dubay's New Tax Papers

HeritageCurtis S. Dubay (Heritage Foundation):

  • PEP and Pease Hurt Larger Families Most and Slow Growth:  "In the fiscal cliff deal, President Barack Obama and Congress surprisingly reinstated two long dormant tax policies: the personal exemption phaseout (PEP) and “Pease,” a cap on itemized deductions. The 2001 Bush tax cuts rightfully abolished them because they are bad policies. Now they are back, raising taxes on larger families and reducing the incentives to work and save. These reduced incentives will slow economic growth and, like the tax increase, hit larger families hardest. Pease is similar to the cap on deductions and exemptions that President Obama has proposed in his budgets. Fundamental tax reform is the best way for Congress to fix its mistake of reviving these policies."
  • CBO Report on “Tax Expenditures” Has It Wrong:  "The Congressional Budget Office (CBO) released a report on the distribution of tax expenditures” that some are wrongly using to push for additional tax increases. This was inevitable because the report takes the wrong approach to the issue."
  • E-sales Tax No Bargain:  "Gov. Bob McDonnell’s transportation plan includes a unique provision. If Congress passes the Marketplace Fairness Act, Virginia would use the new revenue from Internet sales taxes for transportation projects, sparing Virginians an increase of the gas tax. A respite from higher gas taxes sounds good. But Virginia’s businesses will pay a hefty compliance toll if the bill becomes law. And Virginians who shop online will pay the tab that drivers would’ve paid had the bill not become law."
  • Senate Immigration Bill Does Not Require Payment of All Back Taxes:  "There are many serious flaws in the controversial Senate immigration bill, the Border Security, Economic Opportunity, and Immigration Modernization Act (S. 744). One such flaw is that it fails a standard of basic fairness to which immigration has long been held: It does not meaningfully require illegal immigrants to pay back taxes, interest, and penalties on all the income they earned while here in the U.S. illegally before being granted legal status."

June 19, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Tuesday, June 18, 2013

CBPP: State Income Tax Revenues Surge 17.6%

Center on Budget and Policy Priorities:  States Should React Cautiously to Recent Income Tax Growth April Surge Provides Opportunity to Invest in Infrastructure, Boost Reserves:

Recent tax collections are considerably higher than last year in most states and, in many cases, exceed states’ projections when they adopted their current budgets in the spring of 2012.  In 32 states for which data are available, state tax collections in the first ten months of fiscal year 2013 were 5.7 percent higher than in the same period last year, on average. 

Figure 1

  A closer look into the tax collection reports reveals that: 

  • Much of the recent growth is in the income tax.  With two months left in the fiscal year, the typical state has collected 8.9 percent more personal income taxes than it did in the same period last year.  Sales taxes have grown more slowly.  This is, in part, the latest demonstration of the fact than income taxes rise more rapidly than sales taxes during periods of economic growth. 
  • The revenue growth and particularly income tax growth is nationwide.  Some 26 of the 30 states for which data are available experienced double-digit growth in income taxes between April 2012 and April 2013. 
  • While a portion of the income tax growth reflects the economic recovery, an additional portion reflects wealthy taxpayers shifting income into 2012 that they would have received in 2013 in anticipation of federal tax rate increases in 2013.
  • Even with this recent growth, state tax revenues have not recovered from the Great Recession. Revenues likely still remain more than 3 percent below pre-recession levels, after adjusting for inflation.  And because of the one-time nature of much of the recent revenue growth, revenue growth is likely to slow again.

June 18, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Monday, June 17, 2013

Public Citizen: Industry Lobbyists Dominate Tax Reform Debate

Public Citizen LogoPublic Citizen, Lax Taxes: Industry Has Resource Advantage in Battle over Bills that Would Raise Revenue and Bring Fairness to Tax Code:

Legislation in Congress that would address tax loopholes, raise revenue, increase the fairness of the tax code and provide stability to the financial system are subject to lobbying efforts that are overwhelmingly lopsided in favor of industry interests, a new Public Citizen report shows. The report analyzes lobbying disclosure data to illustrate the number of lobbyists that are working on each of three bills: the Cut Unjustified Tax Loopholes Act (CUT Loopholes), the Stop Tax Haven Abuse Act and the Wall Street Trading and Speculators Tax Act – finding that 331 of the 383, or 86 percent, of lobbyists who have worked on these bills in the past two Congresses represent industry clients.

(Hat Tip: Citizens for Tax Justice.)

June 17, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Hungerford: Corporate Tax Rates and Economic Growth Since 1947

Economic Policy Institute:  Corporate Tax Rates and Economic Growth Since 1947, by Thomas L. Hungerford:

This brief examines corporate income-tax rates, and the argument linking low corporate tax rates with higher economic growth. The principal findings are:

  • Claims that the United States’ corporate tax rate is uniquely burdensome to U.S. business when compared with the corporate tax rates of its industrial peers are incorrect. While the United States has one of the highest statutory corporate income-tax rates among advanced countries, the effective corporate income-tax rate (27.7 percent) is quite close to the average of rich countries (27.2 percent, weighted by GDP).
  • The U.S. corporate income-tax rate is also not high by historic standards. The statutory corporate tax rate has gradually been reduced from over 50 percent in the 1950s to its current 35 percent.
  • The current U.S. corporate tax rate does not appear to be impeding corporate profits. Both before-tax and after-tax corporate profits as a percentage of national income are at post–World War II highs; they were 13.6 percent and 11.4 percent, respectively, in 2012.
  • Lowering the corporate income-tax rate would not spur economic growth. The analysis finds no evidence that high corporate tax rates have a negative impact on economic growth (i.e., it finds no evidence that changes in either the statutory corporate tax rate or the effective marginal tax rate on capital income are correlated with economic growth).
 Chart 3

(Hat Tip: Citizens for Tax Justice.)

June 17, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Saturday, June 15, 2013

State & Local Property Tax Collections Per Capita

Sunday, June 2, 2013

Percentage of Tax Returns Claiming Charitable Deductions

Chart

The Motley Fool: The 6 Most Generous States in America:

  1. Maryland (40.1% of tax returns; $2,969 median contribution)
  2. New Jersey (36.0%; $2,181)
  3. Connecticut (35.9%; $1,916)
  4. Utah (33.1%; $5,255)
  5. Minnesota (32.7%; $2,213)
  6. Virginia (32.5%; $2,790)

June 2, 2013 in Tax, Think Tank Reports | Permalink | Comments (3) | TrackBack (0)

Friday, May 17, 2013

AEI: Taxing Individuals Rather Than Families

AEI:  The Tax Treatment of the Family, by Aspen Gorry & Sita Nataraj Slavov:

In two recent cases, the U.S. Supreme Court considered constitutional challenges to the federal Defense of Marriage Act—which denies federal recognition of same-sex marriage—and to California’s Proposition 8, a constitutional amendment banning same-sex marriage. Regardless of the outcomes of these two cases, the controversy over same-sex marriage highlights an important tax policy question: should the US tax code treat people as families, as it currently does, or as individuals? This paper considers the costs and benefits of switching to a tax system based on individual, rather than family, income. 

May 17, 2013 in Tax, Think Tank Reports | Permalink | Comments (3) | TrackBack (0)

Wednesday, May 15, 2013

AEI: Tax Policy and the Nobel Prize

AEIAmerican Enterprise Institute Podcast:   Tax Policy and the Nobel Prize:

What will you do with your Nobel Prize Money? On the latest episode of Banter, AEI economist Aparna Mathur discusses the tax policy surrounding academic, scientific, and philanthropic prize winnings. America is the only country that taxes these earnings and as a result, many give their winnings to charity. Should these winners, who’ve contributed so much to society already, be allowed to keep the fruits of their labor or should they be encouraged to contribute to further social good? Plus, Stu and Andrew play a round of “guess the feminist critique.”

May 15, 2013 in Tax, Think Tank Reports | Permalink | Comments (1) | TrackBack (0)

Saturday, May 11, 2013

State Beer Taxes

Saturday, May 4, 2013

State Inheritance and Estate Tax Rates and Exemptions

Friday, May 3, 2013

The Flawed Business Climate Rankings

Gradingplaces coverGood Jobs First:  Grading Places: What Do the Business Climate Rankings Really Tell Us?:

Prominent studies that purport to measure and rank the states’ “business climates” are actually politicized grab-bags of data. They contradict each other wildly, have no predictive value, and should not be used to inform public policies. This is only the third such analysis of pseudo-social science “business climatology” in 27 years.

Press and blogosphere coverage:

For criticism of the Good Jobs First study, see:

May 3, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)

Thursday, April 25, 2013

CTJ: Stock Option Tax Break Saved Fortune 500 Corporations $27 Billion Over Past Three Years

CTJCitizens for Tax Justice, Executive-Pay Tax Break Saved Fortune 500 Corporations $27 Billion Over the Past Three Years; Apple & Facebook Biggest Beneficiaries of Stock Option Loophole:

Earlier this year, Citizens for Tax Justice reported that Facebook Inc. had used a single tax break, for executive stock options, to avoid paying even a dime of federal and state income taxes in 2012. Since then, CTJ has investigated the extent to which other large companies are using the same tax break. This short report presents data for 280 Fortune 500 corporations that, like Facebook, disclose a portion of the tax benefits they receive from this tax break.

  • These 280 corporations reduced their federal and state corporate income taxes by a total of $27.3 billion over the last three years, by using the so-called “excess stock option” tax break.
  • In 2012 alone, the tax break cut Fortune 500 income taxes by $11.2 billion.
  • Just 25 companies received more than half of the total excess stock option tax benefits accruing to Fortune 500 corporations over the past three years.
  • Apple alone received 12 percent of the total excess stock option tax benefits during this period, enjoying $3.2 billion in stock option tax breaks during the past three years. JP Morgan, Goldman Sachs and ExxonMobil collectively enjoyed 10 percent of the total.
  • In 2012, Facebook wiped out its entire U.S. income tax liability by using excess stock option tax breaks.
  • Over the past three years, Apple slashed its federal and state income taxes by 20 percent using this single tax break.

How It Works: Companies Deduct Executive Compensation Costs They Never Actually Paid
Most big corporations give their executives (and sometimes other employees) options to buy the company’s stock at a favorable price in the future. When those options are exercised, corporations can take a tax deduction for the difference between what the employees pay for the stock and what it’s worth (while employees report this difference as taxable wages).

Before 2006, companies could deduct the “cost” of the stock options on their tax returns, reducing their taxable profits as reported to the IRS, but didn’t have to reduce the profits they reported to their shareholders in the same way, creating a big gap between “book” and “tax” income. Some observers, including CTJ, argued that the most sensible way to resolve this would be to deny companies any tax deduction for an alleged “cost” that doesn’t require an actual cash outlay, and to require the same treatment for shareholder reporting purposes.

But instead, rules in place since 2006 maintained the tax write-off, but now require companies to lower their “book” profits somewhat to take account of options. But the book write-offs are still usually considerably less than what the companies take as tax deductions. That’s because the oddly-designed rules require the value of the stock options for book purposes to be calculated — or guessed at — when the options are issued, while the tax deductions reflect the actual value when the options are exercised. Because companies typically low-ball the estimated values, they usually end up with much bigger tax write-offs than the amounts they deduct in computing the profits they report to shareholders.

(Hat Tip: Francine Lipman.)

April 25, 2013 in Tax, Think Tank Reports | Permalink | Comments (3) | TrackBack (0)

Thursday, April 18, 2013

Today Is Tax Freedom Day -- Earlier in MS, LA & TN, Later in CT, NY & NJ

Tax Foundation logoToday is Tax Freedom Day, the day on which Americans will have earned enough money to pay all federal, state, and local taxes for the year:

Tax Freedom Day is the day when the nation as a whole has earned enough money to pay its total tax bill for the year. A vivid, calendar based illustration of the cost of government, Tax Freedom Day divides all federal, state, and local taxes by the nation’s income. In 2013, Americans will pay $2.76 trillion in federal taxes and $1.45 trillion in state taxes, for a total tax bill of $4.22 trillion, or 29.4 percent of income. April 18 is 29.4 percent, or 108 days, into the year.

Tax Freedom Day is five days later than last year, due mainly to the fiscal cliff deal that raised federal taxes on individual income and payroll. Additionally, the Affordable Care Act’s investment tax and excise tax went into effect. Finally, despite these tax increases, the economy is expected to continue its slow recovery, boosting profits, incomes, and tax revenues. ...

The total tax burden borne by residents of different states varies considerably, due to differing state tax policies and because of the steep progressivity of the federal tax system. This means higher income states celebrate Tax Freedom Day later: Connecticut (May 13), New York (May 6), and New Jersey (May 4). Residents of Mississippi will bear the lowest average tax burden in 2013, with Tax Freedom Day arriving for them on March 29. Also early are Louisiana (March 29) and Tennessee (April 2).

 

Rank

 

State

Days Worked

to Pay Taxes

Tax Freedom Day

1

Connecticut

133

May 13

2

New York

126

May 6

3

New Jersey

124

May 4

4

Illinois

115

April 25

4

Massachusetts

115

April 25

6

California

114

April 24

7

Minnesota

113

April 23

8

Maryland

111

April 21

9

Washington

110

April 20

9

Wisconsin

110

April 20

Average

United States

108

April 18

40

Alaska

96

April 6

40

Kentucky

96

April 6

40

Oklahoma

96

April 6

43

Alabama

95

April 5

43

Arizona

95

April 5

45

South Dakota

94

April 4

46

New Mexico

93

April 3

46

South Carolina

93

April 3

48

Tennessee

92

April 2

49

Louisiana

88

March 29

49

Mississippi

88

March 29

Tax Foundation 2

The Center on Budget and Policy Priorities criticizes the Tax Foundation's methodology here.

April 18, 2013 in Tax, Think Tank Reports | Permalink | Comments (5) | TrackBack (0)

CTJ: Ten Reasons Why We Need Corporate Tax Reform

Citizens for Tax Justice, Ten (of Many) Reasons Why We Need Corporate Tax Reform:

This CTJ report illustrates how profitable Fortune 500 companies in a range of sectors of the U.S. economy have been remarkably successful in manipulating the tax system to avoid paying even a dime of tax on billions of dollars in profits. These ten corporations’ tax situations shed light on the widespread nature of corporate tax avoidance. As a group, the ten companies paid no federal income tax on $16 billion in profits in 2012, and they paid zero federal income tax on $57 billion in profits over the past five years. All but one paid less than zero federal income tax in 2012; all paid exceedingly low rates over five years.

April 18, 2013 in Tax, Tax Profs, Think Tank Reports | Permalink | Comments (1) | TrackBack (0)

Sunday, April 14, 2013

Public Opinions on Taxes: 1937 to Today

AEI LogoAmerican Enterprise Institute, Public Opinions on Taxes: 1937 to Today:

The most comprehensive collection of polls ever compiled on the subject of taxes.

April 14, 2013 in Tax, Think Tank Reports | Permalink | Comments (0) | TrackBack (0)