TaxProf Blog

Editor: Paul L. Caron
Pepperdine University School of Law

Monday, May 23, 2016

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

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

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

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

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

Thursday, May 19, 2016

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

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

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

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

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

Friday, May 13, 2016

Pew:  America’s Shrinking Middle Class

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

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

Pew 2A

Pew 1A

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

Thursday, May 12, 2016

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

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

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

CBPP

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

Mitchell:  The Necessary And Valuable Economic Role Of Tax Havens

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

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

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

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

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

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

Tuesday, May 3, 2016

The Estate Tax Is Destroying The Environment

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

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

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

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

Tuesday, April 26, 2016

Corporate Integration:  An Important Component Of Tax Reform

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

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

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

Sunday, April 24, 2016

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

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

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

Tax Freedom Day

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

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

Tuesday, March 22, 2016

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

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

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

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

Monday, March 14, 2016

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

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

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

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

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

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

Friday, February 26, 2016

Auerbach & Gale:  The Deteriorating Fiscal Outlook

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

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

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

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

The Tax Implications Of Immigration Reform: Two Perspectives

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

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

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

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

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

How Shady Tax Treaties Are Fueling Inequality and Poverty

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

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

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

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

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

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

Thursday, January 28, 2016

Tax Rates, Tax Reform And Tax Revenues

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

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

Top Tax Rates and Revenues as % of GDP

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

Friday, January 22, 2016

Highest State And Local Tax Burdens Are In Blue States, Lowest Are In Red States

Tax Foundation, State-Local Tax Burden Rankings FY 2012:

During the 2012 fiscal year, state-local tax burdens as a share of state incomes decreased on average across the U.S. Average income increased at a faster rate than tax collections, driving down state-local tax burdens on average.

New Yorkers faced the highest burden, with 12.7 percent of income in the state going to state and local taxes. Connecticut (12.6 percent) and New Jersey (12.2 percent) followed closely behind. On the other end of the spectrum, Alaska (6.5 percent), South Dakota (7.1 percent) and Wyoming (7.1 percent) had the lowest burdens.

Map

Interestingly, the ten states with the highest per capita tax burden voted for Barack Obama in the 2012 presidential election, and eight of the ten states with the lowest per capita tax burden voted for Mitt Romney.

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January 22, 2016 in Tax, Think Tank Reports | Permalink | Comments (9)

Tuesday, January 5, 2016

New Treasury Data Shows How Progressive America's Tax Code Really Is

Tax Foundation logoScott Hodge (Tax Foundation), New Treasury Data Shows How Progressive America's Tax Code Really Is:

Recent data produced by Treasury’s Office of Tax Analysis shows that not only is the income tax very progressive, but so too is the overall tax system when we include payroll taxes, corporate income taxes, and various excise taxes.

Treasury’s data for 2015 [found here] allows us to look at two simple ways of measuring the progressivity of the tax code: the share of the total tax burden borne by families at each level of income; and, the average tax rates paid by families at each level of income.

The Treasury data is comprehensive, in that it includes all roughly 167 million families (rather than just the 145 million income tax filers) and it uses a broader “cash” measure of income that includes government transfers in addition to wages, salaries, and investment income. Treasury divides the population into deciles, or ten equal groups of 16.7 million families.

Chart

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January 5, 2016 in Tax, Think Tank Reports | Permalink | Comments (2)

Tuesday, December 22, 2015

Tax Policy Center:  Trump Tax Plan Adds $10 Trillion To Debt, Slashes Taxes For Top 0.1%

TrumpLeonard E. Burman, Jim Nunns, Jeff Rohaly & Joseph Rosenberg (Tax Policy Center), An Analysis of Donald Trump's Tax Plan:

This paper analyzes presidential candidate Donald Trump’s tax proposal. His plan would significantly reduce marginal tax rates on individuals and businesses, increase standard deduction amounts to nearly four times current levels, and curtail many tax expenditures. His proposal would cut taxes at all income levels, although the largest benefits, in dollar and percentage terms, would go to the highest-income households. The plan would reduce federal revenues by $9.5 trillion over its first decade before accounting for added interest costs or considering macroeconomic feedback effects. The plan would improve incentives to work, save, and invest. However, unless it is accompanied by very large spending cuts, it could increase the national debt by nearly 80 percent of gross domestic product by 2036, offsetting some or all of the incentive effects of the tax cuts.

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December 22, 2015 in Political News, Tax, Think Tank Reports | Permalink | Comments (2)

Monday, December 14, 2015

Pew:  The American Middle Class Is Losing Ground

Pew 2APew Research Center, The American Middle Class Is Losing Ground:

After more than four decades of serving as the nation’s economic majority, the American middle class is now matched in number by those in the economic tiers above and below it. In early 2015, 120.8 million adults were in middle-income households, compared with 121.3 million in lower- and upper-income households combined, a demographic shift that could signal a tipping point, according to a new Pew Research Center analysis of government data.

In at least one sense, the shift represents economic progress: While the share of U.S. adults living in both upper- and lower-income households rose alongside the declining share in the middle from 1971 to 2015, the share in the upper-income tier grew more.

Over the same period, however, the nation’s aggregate household income has substantially shifted from middle-income to upper-income households, driven by the growing size of the upper-income tier and more rapid gains in income at the top. Fully 49% of U.S. aggregate income went to upper-income households in 2014, up from 29% in 1970. The share accruing to middle-income households was 43% in 2014, down substantially from 62% in 1970.

And middle-income Americans have fallen further behind financially in the new century. In 2014, the median income of these households was 4% less than in 2000. Moreover, because of the housing market crisis and the Great Recession of 2007-09, their median wealth (assets minus debts) fell by 28% from 2001 to 2013.

Meanwhile, the far edges of the income spectrum have shown the most growth. In 2015, 20% of American adults were in the lowest-income tier, up from 16% in 1971. On the opposite side, 9% are in the highest-income tier, more than double the 4% share in 1971. At the same time, the shares of adults in the lower-middle or upper-middle income tiers were nearly unchanged.

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December 14, 2015 in Tax, Think Tank Reports | Permalink | Comments (1)

Thursday, December 3, 2015

NY Times: Tax Deductions Blunt Impact Of Large Corporate Settlements

USPIRG_SettlementsReportNew York Times:  Tax Deductions Blunt Impact of Large Corporate Settlements, Report Says, by Liz Moyer:

Corporations continue to use big civil legal settlements with federal regulators as a way to deduct billions of dollars from their American tax bills, largely because the regulators fail to forbid the practice in the terms of the settlements.

BP’s pending $20.8 billion settlement with the Justice Department and other federal and state regulators related to the Deepwater Horizon oil spill in 2010 allows about $15.3 billion to be classified as a tax-deductible business expense, according to an analysis by the United States Public Interest Research Group, a nonprofit advocacy group [Settling for a Lack of Accountability? Which Federal Agencies Allow Companies to Write Off Out-of-Court Settlements as Tax Deductions, and Which Are Transparent about It].

Likewise, the Justice Department’s $25 billion mortgage settlement with Bank of America, JPMorgan Chase, Wells Fargo, Citigroup and Ally Financial in 2012 — billed at the time as the largest consumer financial protection settlement in United States history — allowed $20 billion to be eligible as a deduction for those banks.

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December 3, 2015 in Tax, Think Tank Reports | Permalink | Comments (0)

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:

1

Wyoming

41

Maryland

2

South Dakota

42

Ohio

3

Alaska

43

Wisconsin

4

Florida

44

Connecticut

5

Nevada

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

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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:

TF3

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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:

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.

Mercatus

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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.

Amazon

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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

FactCheck.org: Obama's Loophole Logic

FactCheck LogoFactCheck.org, 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.

Basis

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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):

B1

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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:

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)