TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Monday, November 23, 2015

2016 Business Tax Climate: Chilliest in Blue States

Tax Foundation logoThe Tax Foundation has released the 2016 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:






South Dakota














Rhode Island






New Hampshire










New York




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

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November 23, 2015 in Tax, Think Tank Reports | Permalink | Comments (6)

Bottom 50% Earn 11% Of Income, Pay 3% Of Income Taxes; Top 1% Earn 19% Of Income, Pay 38% Of Income Taxes

Tax Foundation logoFollowing up on my previous post, Income Inequality Decreased Significantly in 2013:  Tax Foundation, Summary of the Latest Federal Income Tax Data, 2015 Update:

The Internal Revenue Service has recently released new data on individual income taxes for calendar year 2013, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles. The data demonstrates that the U.S. individual income tax continues to be progressive, borne mainly by the highest income earners. ...

High-Income Americans Paid the Majority of Federal Taxes
In 2013, the bottom 50 percent of taxpayers (those with AGIs below $36,841) earned 11.49 percent of total AGI. This group of taxpayers paid approximately $34 billion in taxes, or 2.78 percent of all income taxes in 2013. In contrast, the top 1 percent of all taxpayers (taxpayers with AGIs of $428,713 and above), earned 19.04 percent of all AGI in 2013, but paid 37.80 percent of all federal income taxes.

In 2013, the top 1 percent of taxpayers accounted for more income taxes paid than the bottom 90 percent combined. The top 1 percent of taxpayers paid $465 billion, or 37.80 percent of all income taxes, while the bottom 90 percent paid $372 billion, or 30.20 percent of all income taxes.

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November 23, 2015 in Tax, Think Tank Reports | Permalink | Comments (1)

Wednesday, November 4, 2015

United States Is Third Biggest Tax Haven, Above Cayman Islands

FSITax Justice Blog, How the U.S. Became a Top Secrecy Jurisdiction:

The U.S. ranks as the third biggest offender – just after Switzerland and Hong Kong – on the Tax Justice Network’s 2015 Financial Secrecy Index when it comes to facilitating financial secrecy and tax evasion, or, in other words, enabling individuals to hide their assets.

The largest drivers for the United States’ high ranking are its financial secrecy laws and that it has the largest share of the global market for offshore financial services.

November 4, 2015 in Tax, Think Tank Reports | Permalink | Comments (3)

Income Inequality Decreased Significantly in 2013

Scott Greenberg (Tax Foundation), Income Inequality Decreased Significantly in 2013:

The top 1% of American households made a smaller share of national income in 2013 than 2012, according to new statistics from the IRS. Overall, the recently released statistics show a more equal income distribution in 2013 than the year before.

Tax Foundation

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November 4, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, October 8, 2015

Major Penalty for High Taxes: How High Income Taxes Drive NHL Players And Other High-Income Earners To Lower Tax Jurisdictions

HockeyCanadian Taxpayers Federation, Major Penalty for High Taxes: How High Income Taxes Drive NHL Players and Other High-Income Earners to Lower Tax Jurisdictions (press release):

A paper co-authored by the Canadian Taxpayers Federation (CTF) and Americans for Tax Reform (ATR) reveals that Montréal, Los Angeles, San Jose and Anaheim are some of the least financially attractive destinations for NHL players due to high tax rates.

The new report, entitled Major Penalty for High Taxes, looks at NHL team salary spending, tax rates in the relevant province or state, and the “true cap,” which is the impact taxes have on the salary cap. The report also examined the tax impact of various off-season trades on players’ incomes.

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October 8, 2015 in Tax, Think Tank Reports | Permalink | Comments (2)

Tuesday, October 6, 2015

Offshore Shell Games 2015: The Use of Offshore Tax Havens by Fortune 500 Companies

Shell Games 2Citizens for Tax Justice & U.S. PIRG, Offshore Shell Games 2015: The Use of Offshore Tax Havens by Fortune 500 Companies:

U.S.-based multinational corporations are allowed to play by a different set of rules than small and domestic businesses or individuals when it comes to the tax code. Rather than paying their fair share, many multinational corporations use accounting tricks to pretend for tax purposes that a substantial portion of their profits are generated in offshore tax havens, countries with minimal or no taxes where a company’s presence may be as little as a mailbox. Multinational corporations’ use of tax havens allows them to avoid an estimated $90 billion in federal income taxes each year.

Congress, by failing to take action to end to this tax avoidance, forces ordinary Americans to make up the difference. Every dollar in taxes that corporations avoid by using tax havens must be balanced by higher taxes on individuals, cuts to public investments and public services, or increased federal debt.

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October 6, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, October 1, 2015

Gale, Kearney & Orszag: Increasing The Top Income Tax Rate Won't Reduce Income Inequality

William G. Gale, Melissa S. Kearney & Peter R. Orszag (all of The Brookings Institution), Would a Significant Increase in the Top Income Tax Rate Substantially Alter Income Inequality?:

The high level of income inequality in the United States is at the forefront of policy attention. This paper focuses on one potential policy response: an increase in the top personal income tax rate. We conduct a simulation analysis using the Tax Policy Center (TPC) microsimulation model to determine how much of a reduction in income inequality would be achieved from increasing the top individual tax rate to as much as 50 percent. We calculate the resulting change in income inequality assuming an explicit redistribution of all new revenue to households in the bottom 20 percent of the income distribution. The resulting effects on overall income inequality are exceedingly modest.

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October 1, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

Wednesday, September 30, 2015

2015 International Tax Competitiveness Ranking: U.S. Is 32 Out Of 34 OECD Countries

TFWall Street Journal editorial, American Tax Exceptionalism: The U.S. Again Ranks Near the Bottom on Corporate Competitiveness:

Another year of slow economic growth, and another year of zero progress reforming the U.S. tax system. This week the Tax Foundation will release its annual International Tax Competitiveness Index and once again the U.S. ranks a dismal 32nd out of 34 industrialized nations. ...

The index measures various factors that determine how friendly a government is to business and investment, including the amount of taxation and the complexity of tax rules. While Washington gets credit for refraining from a value-added tax on top of its other levies, the U.S. comes in dead last among the 34 developed countries in the Organization for Economic Cooperation and Development (OECD) when it comes to taxing corporate income.

Tax Foundation, 2015 International Tax Competitiveness Index:


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September 30, 2015 in Tax, Think Tank Reports | Permalink | Comments (3)

Friday, September 25, 2015

Taxpayers Flee Democrat-Run States For Republican Ones

Americans for Tax Reform, Taxpayers Fleeing Democrat-Run States for Republican Ones:

In 2013, more than 200,000 people on net fled states with Democrat governors [led by New York, Illinois, California, Connecticut, and Massachusetts] for ones run by Republicans [led by Texas, Florida, South Carolina, North Carolina, and Arizona], according to an analysis of newly released IRS data by Americans for Tax Reform. 

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September 25, 2015 in Tax, Think Tank Reports | Permalink | Comments (28)

Wednesday, September 16, 2015

Heritage: The Redistributive State — The Allocation Of Government Benefits, Services, And Taxes In The United States

Heritage Foundation, The Redistributive State: The Allocation of Government Benefits, Services, and Taxes in the United States:

Each year, families and individuals pay taxes to the government and receive back a wide variety of services and benefits. A fiscal deficit occurs when the benefits and services received by one household or a group of households exceed the taxes paid. When such a deficit occurs, other households must pay, through taxes, for the services and benefits of the group in deficit. Thus, government functions as a redistributive mechanism for transferring resources between groups in society.

This paper examines fiscal balance in the United States by income class. It estimates the distribution of the full array of government benefits and services including cash and near cash benefits, means-tested aid, education services, and general social services. It also estimates the distribution of all direct and indirect taxes used to finance government expenditure.

Heritage 2

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September 16, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

Tuesday, August 25, 2015

The Impact Of Housing Subsidies And Tax Breaks On Inequality

Vox, This Chart Shows How Federal Housing Policy Benefits the Rich More Than the Poor:

If you take out a mortgage to buy a house, the federal tax code lets you deduct your interest payments from your taxable income. People can also deduct state and local property taxes from their federal income taxes.

Both of these tax deductions tend to be larger for rich people, who tend to have more expensive houses. And rich people are also in higher tax brackets, making every dollar deducted worth more. As a result, these tax breaks provide the biggest financial benefit to the wealthiest taxpayers. The Urban Institute's John McGinty, Benjamin Chartoff, and Pamela Blumenthal have created a helpful chart showing just how big these tax breaks get.

Housing tax breaks for rich people are larger than housing subsidies for poor people.

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August 25, 2015 in Tax, Think Tank Reports | Permalink | Comments (1)

Saturday, July 25, 2015

Gas Taxes Are Highest In PA (52¢), NY (46¢); Lowest in AK (12¢), NJ (14¢)

Tax Foundation, How High Are Gas Taxes in Your State?:

This week’s tax map takes a look at state gasoline tax rates, using data from a recent report by the American Petroleum Institute. Pennsylvania has the highest rate of 51.60 cents per gallon (cpg), and is followed closely by New York (45.99 cpg), Hawaii (45.10 cpg), and California (42.35 cpg). On the other end of the spectrum, Alaska has the lowest rate at 12.25 cpg, but New Jersey (14.50 cpg) and South Carolina (16.75 cpg) aren’t far behind. These rates do not include the additional 18.40 cent federal excise tax.

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July 25, 2015 in Tax, Think Tank Reports | Permalink | Comments (1)

Monday, July 13, 2015

The Relative Value of $100: Lowest In D.C. ($85), Highest In Mississippi ($115)

Tax Foundation, The Relative Value of $100: Which States Offer the Biggest Bang For Your Buck?:

Tax Foundation

The Bureau of Economic Analysis has been measuring this phenomenon for two years now; it recently published its data for prices in 2013. Using this data, we have adjusted the value of $100 to show how much it buys you in each state.

July 13, 2015 in Tax, Think Tank Reports | Permalink | Comments (3)

Sunday, July 12, 2015

The Wealthiest ZIP Codes In America

Wealthiest ZIP Codes in America:


(Hat Tip: Francine Lipman.)

July 12, 2015 in Tax, Think Tank Reports | Permalink | Comments (3)

Thursday, July 9, 2015

Tax Foundation Seeks To Fill Several Positions

Tuesday, July 7, 2015

50-State Fiscal Condition Ranking

Mercatus Center (George Mason University), Ranking the States by Fiscal Condition:

In new research for the Mercatus Center at George Mason University, Senior Research Fellow Eileen Norcross ranks each US state’s financial health based on short- and long-term debt and other key fiscal obligations, including unfunded pensions and health care benefits. The study, which builds on previous Mercatus research about state fiscal conditions, provides information from the states’ audited financial reports in an easily accessible format, presenting an accurate snapshot of each state’s fiscal health.


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July 7, 2015 in Tax, Think Tank Reports | Permalink | Comments (1)

Wednesday, June 24, 2015

Amazon Collects Sales Tax In 25 States (Covering 77% Of U.S. Population)

Tax Justice Blog, Sales-Tax-Free Purchases on Amazon Are a Thing of the Past for Most:

Amazon is now collecting sales taxes in fully half the states that are collectively home to over 247 million people, or 77 percent of the country’s population.  In other words, more than three out of every four Americans now live in a state where Amazon willingly collects the sales taxes its customers owe.


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June 24, 2015 in Tax, Think Tank Reports | Permalink | Comments (4)

Saturday, June 6, 2015

Independent Commission For The Reform of International Corporate Taxation Calls For New Measures To Combat Global Tax Dodging

ICRICTThe Independent Commission For The Reform of International Corporate Taxation, a coalition of ten charities and human rights groups and Nobel Prize winning economist Joseph Stiglitz, has rejected the OECD's proposed measures to combat global tax dodging by multinational firms and instead called for a global minimum tax and eventually international formulary apportionment.

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June 6, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

Friday, April 24, 2015

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 the year. Tax Freedom Day takes all federal, state, and local taxes and divides them by the nation’s income. In 2015, Americans will pay $3.28 trillion in federal taxes and $1.57 trillion in state and local taxes, for a total tax bill of $4.85 trillion, or 31 percent of national income. This year, Tax Freedom Day falls on April 24, or 114 days into the year.

This year, Americans will work the longest to pay federal, state, and local individual income taxes (43 days). Payroll taxes will take 26 days to pay, followed by sales and excise taxes (15 days), corporate income taxes (12 days), and property taxes (11 days). The remaining 7 days are spent paying estate and inheritance taxes, customs duties, and other taxes.

Tax Freedom

Center on Budget and Policy Priorities, Tax Foundation Figures Do Not Represent Typical Households’ Tax Burdens:

The Tax Foundation released its annual "Tax Freedom Day" report today that, once again, can leave a strikingly misleading impression of tax burdens -- showing an average federal tax rate across the United States that's likely higher than the tax rate that 80 percent of U.S. households actually pay.

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April 24, 2015 in Tax, Think Tank Reports | Permalink | Comments (1)

Wednesday, February 11, 2015 Obama's Loophole Logic

FactCheck, Obama's Loophole Logic:

The White House is claiming that the top 1 percent of all earners would pay 99 percent of the capital gains tax increase proposed by the president. But that claim rests on some debatable logic.

According to the Obama administration’s way of figuring, a lot of Americans would suddenly enter the top 1 percent only after they die.

An independent analysis by the Urban-Brookings Tax Policy Center estimates that the top 1 percent of earners would bear 58 percent of the increase, not 99 percent. By the TPC’s figuring, the Obama proposal would affect not only the rich, but a good many middle-income taxpayers as well. ...

Which view is right? That depends on what one considers to be “income,” as we shall explain in a moment.

Our Conclusion

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February 11, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, January 29, 2015

Three Cheers for the Death Tax!

The Daily Beast, Three Cheers for the Death Tax!, by Michael Tomasky:

Of all the Obama proposals unveiled in the State of the Union address, the one that’s probably drawn the most right-wing fire is the one that would close an inheritance capital-gains tax loophole. ... Undertaxing inherited wealth is ... immoral. ...

[T]he estate tax doesn’t start until $5.43 million per person or $10.86 million per couple. That’s high enough that only the wealthiest .15 percent of Americans pay any estate tax. Among the 3,780 U.S. households that owed any estate tax in 2013, their average tax rate was 16.6 percent.

Center for American Progress, Report of the Commission on Inclusive Prosperity (Jan. 15, 2015):

Combined with the United States’ generous estate tax structure, the step-up in basis rule creates very low effective tax rates on inherited wealth. The Congressional Budget Office estimates that the step-up in basis rule will reduce federal revenues by $644 billion over 10 years, with 21 percent of that subsidy going to the top 1 percent of income earners.


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January 29, 2015 in Tax, Think Tank Reports | Permalink | Comments (2)

Thursday, January 15, 2015

The Case for a $200 Federal Tax Credit for Campaign Contributions

CACConstitutional Accountability Center:  Participation and Campaign Finance: The Case for a Federal Tax Credit, by David H. Gans:

Five years after the Supreme Court’s ruling in Citizens United v. FEC, our democracy is badly broken.  Chief Justice John Roberts and his conservative colleagues have turned our Constitution’s promise of democracy of, by, and for the people on its head, striking down a host of federal and state laws designed to limits opportunities for corruption.  Meanwhile, the national conversation over money in politics has grown stale, with Congress gridlocked and unable to accomplish anything.  Now, more than ever, we need to find reforms that can bridge the divide over money in politics and help improve our democracy. 

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January 15, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

Wednesday, January 14, 2015

State Tax Inequality Index

Institute on Taxation and Economic Policy, Who Pays? A Distributional Analysis of the Tax Systems in All 50 States (5th ed. Jan. 2015):


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January 14, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, November 20, 2014

Seven Companies Spent More on CEO Pay Than Federal Taxes

IPS_Fleecing_Uncle_Sam_Report_Nov2014 coverInstitute for Policy Studies and the Center for Effective Government, Fleecing Uncle Sam: A Growing Number of Corporations Spend More on Executive Compensation Than Federal Income Taxes:

Of America’s 30 largest corporations, seven (23 percent) paid their CEOs more than they paid in federal income taxes last year.

  • All seven of these firms were highly profitable, collectively reporting more than $74 billion in U.S. pre-tax profits. However, they received a combined total of $1.9 billion in refunds from the IRS.
  • The seven CEOs leading these tax-dodging corporations were paid $17.3 million on average in 2013. Boeing and Ford Motors both paid their CEOs more than $23 million last year while receiving large tax refunds.

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November 20, 2014 in Tax, Think Tank Reports | Permalink | Comments (4)

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:






South Dakota














Rhode Island






New Hampshire










New York




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.


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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).


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.


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










































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.


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:

Continue reading

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.


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.


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

Wednesday, August 14, 2013

Growth in State Tax Collections, 2001-2011