Paul L. Caron

Saturday, February 25, 2023

Cato Institute: The Federal Tax System Is Highly Progressive

Cato Institute, The State of Taxes: How the Feds Fund (and Don’t Fund) Spending:

Government data shows that the federal tax system is highly progressive. The highest‐​income Americans pay a disproportionate share of income taxes and face the highest average tax rates across all federal taxes. ...

The lowest‐​income half of Americans paid an average income tax rate of 3.1 percent, while the top 1 percent of income earners paid a 26.0 percent rate. Across all taxpayers, the average income tax rate was 13.6 percent.

High‐​income earners also pay a disproportionate share of the income taxes relative to income earned. Figure 1 shows that as a share of adjusted gross income (AGI), the top half of income earners paid 97.7 percent of federal income taxes. The top 1 percent earned 22.2 percent of total income and paid 42.3 percent of all the income taxes. The top 10 percent earned 49.5 percent of the income and paid 73.7 percent of the income tax.

Cato 1

The U.S. Treasury’s Office of Tax Analysis also estimates that the entire federal tax system is highly progressive, even after accounting for payroll, corporate, and other taxes. Figure 2 shows that average tax rates climb as incomes increase. The lowest 20 percent of income earners, measured by adjusted family cash income, face average tax rates that are either negative or close to zero. A negative tax rate means that the taxpayer is a net beneficiary of the tax system, likely receiving refundable tax credits, such as the Earned Income Tax Credit (EITC) and Child Tax Credit (CTC).

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February 25, 2023 in Tax, Think Tank Reports | Permalink

Tuesday, February 21, 2023

Tax Policy Center: More Black Couples Incur A Marriage Tax Penalty Than White Couples

Janet Holtzblatt, Swati Joshi & Nora Cahill (Tax Policy Center), Marriage Costs Black Couples More Than White Couples At Tax Time:

We find that 46 percent of Black married couples incurred a marriage penalty under 2018 tax law, compared to 43 percent of white couples.


Conversely, Black couples were less likely to receive a bonus than white couples (36 percent to 43 percent).

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February 21, 2023 in Legal Education, Scholarship, Tax, Tax Scholarship, Think Tank Reports | Permalink

Saturday, February 18, 2023

Tax Policy Center: Itemized Deductions Benefit Whites More Than Blacks And Hispanics

Benjamin R. Page, Tracy Gordon & Aravind Boddupalli (Tax Policy Center), Providing Changemakers The Data They Need To Tackle Racial Inequities In The US Tax Code:

[A]cross all income categories, itemized deductions disproportionately benefit White taxpayers (figure 2). Overall, itemized deductions boost the after-tax incomes of units classified as White by 0.7 percent, whereas those classified as Black gain an average of 0.4 percent, and those classified as Hispanic an average of 0.2 percent. Those differences occur in large part because itemized deductions primarily benefit higher-income households, among whom Black and Hispanic households are underrepresented.


We also found White taxpayers and Black taxpayers benefit relatively more from itemized deductions than Hispanic households, even within the same income categories. For example, among those in the top income quintile (which receives almost 90 percent of the benefits of itemized deductions), itemized deductions raise the after-tax incomes of White taxpayers by an average of 1.1 percent, compared to 1.0 percent for Black taxpayers, and 0.6 percent for Hispanic taxpayers (figure 3).

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February 18, 2023 in Scholarship, Tax, Tax News, Think Tank Reports | Permalink

Monday, January 16, 2023

Americans Moved To Low-Tax States In 2022

Following up on my previous post, New U.S. Census Data: Major Migration From Blue States To Red States:  Tax Foundation, Americans Moved to Low-Tax States in 2022:

Americans were on the move in 2022 and chose low-tax states over high-tax ones. That’s the finding of recent U.S. Census Bureau population data and commercial datasets released this week by U-Haul and United Van Lines. ...

This population shift paints a clear picture: people left high-tax, high-cost states for lower-tax, lower-cost alternatives.

7 of the 10 states with the most outbound migration voted for Joe Biden in 2020, and 8 of the 10 states with the most inbound migration voted for Donald Trump.Tax Foundation (011523)

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January 16, 2023 in Scholarship, Tax, Think Tank Reports | Permalink

Saturday, November 12, 2022

New State Business Tax Climate Index: Blue States Are Worst, Red States Are Best

Tax Foundation, 2023 State Business Tax Climate Index (interactive map tool):

The Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems and provides a road map for improvement.

Tax Foundation

9 of the 10 states with the worst business tax climates voted for Joe Biden in 2020, and 8 of the 10 states with the best business tax climates voted for Donald Trump.

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November 12, 2022 in Tax, Tax News, Think Tank Reports | Permalink

Monday, October 31, 2022

Tax Policy Center Hosts Virtual Event Today On The Future Of Business Taxes Post-Inflation Reduction Act

Future of business taxes

The Tax Policy Center hosts a virtual event on The Future Of Business Taxes Post-Inflation Reduction Act today at 12:30 PM ET (registration):

The recently enacted Inflation Reduction Act (IRA) put in place some significant changes to business taxation, including incentives for clean energy and a minimum tax on large corporations’ book incomes. But how effective will those measures be in achieving their goals? And what should Congress do next, with so many unanswered questions about the future of corporate taxation and climate change?

Join the Urban-Brookings Tax Policy Center for an event examining the IRA and the short-term future of corporate taxation. The event will feature keynote remarks by Treasury Assistant Secretary for Tax Policy Lily Batchelder and two expert panels. The first panel will examine the new corporate tax provisions, and the second panel will examine expanded green-energy incentives.

Keynote Speaker: 

  • Lily Batchelder (Assistant Secretary for Tax Policy, U.S. Treasury)

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October 31, 2022 in Conferences, Tax, Tax Conferences, Tax Scholarship, Think Tank Reports | Permalink

Tuesday, October 4, 2022

Seniors Are Moving From High-Tax States To Low-Tax States

Chris Edwards (Cato Institute), Taxes and Interstate Migration of Seniors:

Americans are moving from high‐​tax states to low‐​tax states. The smart states know this and are cutting income tax rates, as discussed in the forthcoming Fiscal Policy Report Card on America’s Governors.

One group that states want to attract with tax cuts are seniors and retirees. Just this year, 10 states cut their taxes on retirement income, which means income from Social Security, defined‐​benefit (DB) plans, and defined contribution (DC) plans, such as 401(k)s. Currently, about three‐​quarters of the states fully exempt Social Security benefits from taxes. About a dozen states fully exempt DB and DC benefits from taxes, and about half the states partly exempt it. ...

Seniors are moving from high‐​tax to low‐​tax states, as shown in the chart. On the horizontal axis is the sum of state and local sales, property, and individual income taxes as a percentage of income in 2019. On the vertical axis is the ratio of in‐​migration to out‐​migration for households age 65 and older, based on IRS data for 2020. The ratio is above one for states enjoying net in‐​migration and below one for states suffering net out‐​migration. Each state is a dot.


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October 4, 2022 in Tax, Think Tank Reports | Permalink

Tuesday, August 9, 2022

The Effect Of Tax Reform And COVID-19 On Tax Flight Among U.S. Millionaires

Cristobal Young (Cornell; Google Scholar) & Ithai Lurie (U.S. Treasury Department; Google Scholar), Taxing the Rich: The Effect of Tax Reform and the COVID-19 Pandemic on Tax Flight Among U.S. Millionaires:

Taxing the rich is one of the central policy debates in this time of rising inequality. Elite taxation can change the distribution of income in society, support equitable growth, and finance public goods and services that improve the quality of life for everyone. None of these goals are well served, however, if taxes lead to high levels of tax flight among U.S. millionaires. Progressive taxation, especially at the state level, ultimately depends on the embeddedness of the tax base. In other words, are the rich “mobile millionaires,” readily drawn to places with lower tax rates? Or are they “embedded elites,” who are reluctant to migrate away from places where they have been highly successful?

Supply-side economics has long argued that taxes on the rich cause avoidance behavior and reduce the incentive to work, invest, and innovate. Amid the growing red state/blue state rivalry in the United States, tax incentives for migration have become a new focus of debate. Why would rich people continue to live in New York, New Jersey, or California when they could save large sums in taxes by moving to places such as Florida, Texas, or Nevada? Of course, taxes also fund public goods that the rich consume—not even the richest city dweller can get to work without public infrastructure—but top earners have greater ability to opt out of many public services such as schools and social services. From this view, the rich seem motivated and mobile—sensitive to taxation and readily capable of exit.

Yet there are myriad social dimensions that rich households face when migrating to avoid taxes. Top earners are often the “working rich,” with many roots in the places where they built their careers. Others are business owners with complex ties between customers, suppliers, and workers that are not easily relocated. Top earners are often married, have school-aged children, and have lived in their state for many years—social factors that tie people to places. These ties represent place-specific social capital, a form of embeddedness that makes migration costly.

Our new working paper, Taxing the Rich: How Incentives and Embeddedness Shape Millionaire Tax Flight, examines the joint effect of incentives and embeddedness on the mobility of the rich in the United States. Drawing on administrative tax data from IRS tax returns of top income earners, we study two large-scale “natural experiments,” which are contrasting real-life situations that social scientists investigate to determine cause-and-effect relationships. The first is the federal Tax Cuts and Jobs Act of 2017, which changed tax incentives to favor low-tax states. The second is the COVID-19 pandemic, which began in early 2020 in the United States and which deeply disrupted people’s socioeconomic attachments to places. ...

In a typical year, a small number of millionaires circulate between states: Roughly 2.7 percent of the millionaire population moves across state lines, exchanging one state for another. How much did the 2017 tax reform influence this migration? In our working paper, we examined migration rates for every income group, starting from those with the lowest incomes to those making $5 million a year or more. We also examined migration rates for those living in low-tax states, who were incentivized to stay, and high-tax states, who were incentivized to move. Migration patterns before and after the tax reform law passed were essentially identical. (See Figure 1.)

Figure 1

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August 9, 2022 in Scholarship, Tax, Tax Scholarship, Think Tank Reports | Permalink

Saturday, August 6, 2022

Penn Wharton: Decomposing The Decline In Estate Tax Liability Since 2000

Penn Wharton Budget Model, Decomposing the Decline in Estate Tax Liability Since 2000:

We estimate that the federal estate tax would have generated 9 times more revenue in 2019 without the tax changes in 2001 and 2017.

Penn Wharton

Key Points

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August 6, 2022 in Tax, Tax Scholarship, Think Tank Reports | Permalink

Friday, May 13, 2022

Brookings: Rethinking The Corporate Income Tax — The Role Of Rent Sharing

William G. Gale (Brookings Institution; Google Scholar) & Samuel I. Thorpe (Brookings Institution), Rethinking the Incidence of the Corporate Income Tax:

TPCDebates about corporate income tax cuts follow a familiar script. Republicans claim that rank-and-file workers benefit. Democrats argue that affluent shareholders reap the gains.

In a new project [Rethinking the Corporate Income Tax: The Role of Rent Sharing], we find that, workers do benefit, but it is the most affluent employees — managers and executives — who receive the lion’s share of benefits, not rank-and-file staff.

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May 13, 2022 in Tax, Tax Scholarship, Think Tank Reports | Permalink

Thursday, March 10, 2022

IRS Audits Of Poorest Families Soar While Millionaire Audits Continue To Languish

The Transactional Records Access Clearinghouse at Syracuse University has released a new report, IRS Audits Poorest Families at Five Times the Rate for Everyone Else:

A large increase in federal income tax audits targeting the poorest wage earners allowed the Internal Revenue Service to keep overall audit numbers from further declines for Americans as a whole during FY 2021. That resulted in these low-income wage earners with less than $25,000 in total gross receipts being audited at a rate five times higher than for everyone else.


To its credit last year, the IRS did manage to slightly raise the audits of millionaires. During FY 2021 IRS revenue agents and tax examiners audited 13,725 of taxpayers reporting $1 million dollars or more in positive income. This was up from the abysmally small numbers audited during FY 2020 (11,331), but still slightly below how many millionaire returns were audited during FY 2019 (13,970).


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March 10, 2022 in IRS News, Tax, Think Tank Reports | Permalink

Tuesday, January 11, 2022

Tax Policy Center Hosts Virtual Event Today On Taxing Business Income: Evidence From The Survey Of Consumer Finances


The Tax Policy Center hosts a virtual event on Taxing Business Income: Evidence from the Survey of Consumer Finances today at 12:30 PM ET (registration):

Legislated changes in business income taxes over the past 20 years have led to a dramatic reduction in the federal income tax base and revenues. As a result, a significant share of income is never subject to tax. For example, more than half of non-corporate business income in the National Income and Product Accounts does not show up on tax returns.

On January 11, the Urban-Brookings Tax Policy Center will host an event on this divergence between economic and taxable income and its implications for tax policy. Results from new research using the Survey of Consumer Finances will be presented with an eye towards understanding which forms of income do not show up on tax forms, where in the income distribution that divergence is occurring, and the revenue implications of broadening the business income tax base.

William G. Gale, Swati Joshi, Christopher Pulliam & John Sabelhaus, Estimating Income Tax Liabilities With Data From the Survey of Consumer Finances:

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January 11, 2022 in Conferences, Tax, Tax Conferences, Tax Scholarship, Think Tank Reports | Permalink

Saturday, January 1, 2022

New State Business Tax Climate Index: Blue States Are Worst, Red States Are Best

Following up on Thursday's post, New U.S. Census Data: Major Migration From Blue States To Red States, which noted that 9 of the 10 states with the largest population losses voted for Joe Biden in 2020, and 8 of the 10 states with the largest population gains voted for Donald Trump:  Tax Foundation, 2022 State Business Tax Climate Index (interactive map tool):

The Tax Foundation’s State Business Tax Climate Index enables business leaders, government policymakers, and taxpayers to gauge how their states’ tax systems compare. While there are many ways to show how much is collected in taxes by state governments, the Index is designed to show how well states structure their tax systems and provides a road map for improvement.

Tax Foundation

8 of the 10 states with the worst business tax climates voted for Joe Biden in 2020, and 8 of the 10 states with the best business tax climates voted for Donald Trump.

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January 1, 2022 in Tax, Tax News, Think Tank Reports | Permalink

Tuesday, December 7, 2021

Economic Freedom Of North America 2021

Fraser Institute Cover

Fraser Institute, Economic Freedom of North America 2021:

Economic Freedom of North America 2021 is the seventeenth edition of the Fraser Institute’s annual report. This year it measures the extent to which—in 2019, the year with the most recent available comprehensive data—the policies of individual provinces and states were supportive of economic freedom, the ability of individuals to act in the economic sphere free of undue restrictions. There are two indices: one that examines provincial/state and municipal/local governments only and another that includes federal governments as well. The former, our subnational index, is for comparison of individual jurisdictions within the same country. The latter, our allgovernment index, is for comparison of jurisdictions in different countries. ...

Figure 1.2b shows the subnational scores for the US states. After a one-year absence in last year’s report, New Hampshire is again in the top spot with 7.83, followed closely by Tennessee (7.82), then Florida (7.78), Texas (7.75), and Virginia (7.59).3 The least free state was again New York with 4.33, far behind California (4.68), Vermont (4.86), West Virginia (5.00), and New Mexico (5.01).

Fraser Institute Chart 1

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December 7, 2021 in Tax, Think Tank Reports | Permalink

Monday, October 11, 2021

Manhattan Institute Charts: Spending, Taxes, And Deficits

Brian Riedl (Manhattan Institute), 2021 Chart Book Examines Spending, Taxes, and Deficits:

The Manhattan Institute’s Brian Riedl has released the 2021 edition of his book of charts examining the federal budget, spending, taxes, and deficits. The 118-page chart book begins by broadly examining the rising budget deficits and national debt – well beyond the temporary recession deficits – and then gradually dives deeper to show the policies driving the $112 trillion in new deficits projected over the next three decades. Next, it tallies the cost of common spending increase and tax relief proposals, and determines whether those costs can be offset by the proposed tax increases and defense cuts – including a full accounting of the long-term cost of President Biden’s proposals. Finally, the report examines trends in tax revenues and tax progressivity, common budget myths, and offers a full accounting of the fiscal records of Presidents Bush and Obama.

These charts — most of which rely on publicly-available data from the Congressional Budget Office, Office of Management and Budget, Census Bureau, and U.S. Treasury — nevertheless defy conventional wisdom about spending, taxes, and deficits.

MI 3

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October 11, 2021 in Tax, Think Tank Reports | Permalink

Wednesday, April 28, 2021

Corporate Taxes: Rates Down, Revenues Up

Chris Edwards (Cato Institute), Corporate Taxes: Rates Down, Revenues Up:

U.S. Treasury Secretary Janet Yellen recently complained about a “30-year race to the bottom on corporate tax rates,” and is pushing for a higher U.S. rate and a global minimum rate. Yellen wants to make sure that corporate taxes “raise sufficient revenue to invest in essential public goods and respond to crises.” Economist Gabriel Zucman approved of the proposed tax hike, saying corporations should “pay more in taxes, instead of them paying less and less."

Zucman’s claim about “less and less” is incorrect when looking across the major economies in recent decades. ... The chart below shows the average corporate tax rate and average corporate tax revenues as a percent of GDP for 22 countries. The average rate fell from 47 percent in 1980 to 25 percent in 2019. As a consequence, Yellen or Zucman might think that corporate tax revenues would have fallen. But corporate tax revenues are up substantially since the 1980s. Corporate tax revenues for the 22 countries rose from 2.2 percent in 1980 to 3.0 percent in 2019.


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April 28, 2021 in Tax, Tax News, Think Tank Reports | Permalink

Thursday, February 18, 2021

Glogower, Gamage & Richards: Why A Federal Wealth Tax Is Constitutional

Ari Glogower (Ohio State; Google Scholar), David Gamage (Indiana; Google Scholar) & Kitty Richards (Roosevelt Institute), Why a Federal Wealth Tax is Constitutional:

A federal wealth tax can help level the playing field of our unequal society and promote shared economic prosperity. When wealth taxes have been proposed in national campaigns of recent years, they generated strong public support and broadened the conversation over the future of progressive tax policies. However, critics of wealth taxation argue that a wealth tax could be struck down by the Supreme Court because of constitutional provisions that delineate Congress’s power to tax. Namely, critics undermine federal wealth tax proposals by relying on the “apportionment rule,” which requires certain taxes to be apportioned among the states according to their populations.

Ari Glogower, David Gamage, and Kitty Richards contend that the apportionment rule, a vestigial relic of the founders’ compromise on slavery, does not interfere with Congress’s ability to legislate a tax on an individual’s net wealth.

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February 18, 2021 in Scholarship, Tax, Tax Scholarship, Think Tank Reports | Permalink

Wednesday, February 17, 2021

The Unique And Dominant Role Of Tax Policy In Wealth Concentration

Institute for Policy Studies, Wealth Concentration: The Unique and Dominant Role of Tax Policy (Jan. 2021):

[H]ow does the influence of tax policy on wealth concentration interact with the influence of other factors? Has tax policy, over the last century, been the dominant factor in the country’s move from an extremely unequal society to a more egalitarian one and back again? Or are other factors equally or more important?

There are no clear answers, at least from our analysis. But we believe our analysis of the relationship between tax payments of the top .01 percent as a percentage of wealth, and the share of American household wealth held by the top .01 percent, indicates that tax policy plays a unique and dominant role in the concentration of wealth. No other factor is as visibly and as directly connected to the concentration of wealth as tax policy. ...

Using the methodology we developed in The Case for a U.S. Wealth Tax, which we’ve included
here as Appendix I, we estimated the change in tax payments as a percentage of wealth for the
top .01 percent throughout the period 1929 to 2018.


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February 17, 2021 in Tax, Think Tank Reports | Permalink

Tuesday, November 24, 2020

Americans Increasingly Are Leaving High-Tax States For Low-Tax States

Cato Institute, Will High‐​Tax “Superstar Cities” Finally Need to Consider — Gasp! — Their Residents?:

As my Cato colleague Chris Edwards documented here a couple weeks ago, interstate migration data from the U.S. Census Bureau indicate that state tax policy affects where Americans, especially wealthy ones, are choosing to live and work. The following charts ...  confirm Chris’ initial impressions: in 2018 there was a strong, statistically significant (p‐​values < 0.01) relationship between (1) personal state tax burdens — as measured by either the Tax Policy Center or the Tax Foundation — and (2) net interstate migration (ratio of inflows to outflows):

Cato 1

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November 24, 2020 in Tax, Think Tank Reports | Permalink | Comments (2)

Thursday, October 22, 2020

What’s Wrong With A Wealth Tax

Allison Schrager & Beth Akers (Manhattan Institute), What’s Wrong with a Wealth Tax:

In the coming months, Americans can expect calls to tax the wealth of the richest citizens. There are four oft-cited justifications for such a measure: inequality is rising, and there is a need to restore fairness; more revenue is necessary to bring exploding deficits under control, and taxing the wealthy is the least harmful way to do so; extreme wealth disparities harm economic growth; and the rich use their wealth to rig the political system, so democracy requires leveling the playing field.

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October 22, 2020 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (2)

Saturday, August 22, 2020

The Economic Effects Of Wealth Taxes

John Diamond (Rice University) & George Zodrow (Rice University), The Economic Effects of Wealth Taxes:

In this paper, we estimate the economic effects of the wealth tax proposed by Senator Warren using a computable general equilibrium model of the U.S. economy under the assumption that all revenues are used to increase income transfers (excluding Social Security payments) that accrue primarily to lower income groups.

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August 22, 2020 in Scholarship, Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (4)

Tuesday, August 11, 2020

Brookings: Taxing Wealth Transfers Through An Expanded Estate Tax

The Brookings Institution:  Taxing Wealth Transfers Through an Expanded Estate Tax, by William G. Gale, Christopher Pulliam, John Sabelhaus, and Isabel V. Sawhill:

Brookings (2016)American political leaders are currently focused on policies to address the health and economic implications of the COVID-19 pandemic. Nevertheless, it is not too soon to consider policy changes that could be beneficial to implement after the crisis has passed.

The U.S. faces two related and persistent threats to long-term, shared prosperity: growing inequality and rising federal debt. Inequality, especially wealth inequality, has risen sharply over the past 40 years. Children from different socioeconomic backgrounds do not have the same opportunities to achieve the American Dream. The Black-white gap in social mobility is especially concerning. The government’s budget outlook has long been a concern, with the federal debt projected to rise continually relative to the size of the economy, because of an aging population, rising healthcare costs, and inadequate revenues. The pandemic has made each problem more difficult to solve.

Policy makers should be looking for ways to address both issues. One place to start is by raising taxes on the most well-to-do households. During the Democratic primary, there were several proposals for a wealth tax, which would target the richest Americans and raise substantial amounts of revenue. Although a wealth tax would face difficult questions regarding its administrability and constitutionality, proposals for such taxes have re-energized the debate about taxing the wealthy. In some ways, the discussion has shifted from debating whether the rich should pay more in taxes toward determining the best way to achieve that goal.

In this policy brief, we consider the virtues of expanding the estate tax. Coupled with the gift and generation-skipping tax, the estate tax directly targets the intergenerational transfer of wealth. Whether it is ultimately borne by decedents or inheritors, the estate tax is extremely progressive. Inheritances are a major contributor to growing wealth inequality—large inheritances tend to flow to already wealthy heirs. The top ten percent of households by wealth receive 56 percent of all intergenerational transfers, while the bottom half receives only eight percent.

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August 11, 2020 in Scholarship, Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (1)

Tuesday, February 25, 2020

New Tool Examines How U.S. Taxes And Spending Affect Income Inequality

Economic Policy Institute, New Tool Examines How U.S. Taxes and Spending Affect Income Inequality:

EPIToday, the Economic Policy Institute is launching a website aimed at shedding light on how the U.S. tax and spending system affects household income up and down the income distribution.

The U.S. Tax & Spending Explorer allows users to take a deep dive into the ways that the federal government affects the inequality of households’ incomes through taxes and through spending on social insurance and safety net programs. The explorer also examines so-called “tax expenditures,” sometimes referred to as the hidden federal budget. ...

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February 25, 2020 in Tax, Tax News, Think Tank Reports | Permalink | Comments (1)

Thursday, February 20, 2020

Journalist’s Resource Guide To The 2020 Democratic Policy Proposals: Carbon Taxes

Journalist's Resources Guide to the 2020 Democratic Policy Proposals: Carbon Taxes:

JR2In the lead-up to the 2020 elections, the Journalist’s Resource team is combing through the Democratic presidential candidates’ platforms and reporting what the research says about their policy proposals. We want to encourage deep coverage of these proposals — and do our part to help deter horse race journalism, which research suggests can lead to inaccurate reporting and an uninformed electorate. We’re focusing on proposals that have a reasonable chance of becoming policy. For us, that means at least 3 of the 5 top-polling candidates say they intend to tackle the issue. Here’s what the research says about carbon pricing.

Candidates Favoring Carbon Pricing

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February 20, 2020 in Tax, Tax News, Think Tank Reports | Permalink | Comments (0)

Friday, February 14, 2020

Migration to Low‐​Tax States Continues

Chris Edwards (Cato Institute), Migration to Low‐​Tax States Continues:

The Census Bureau has released estimates of state population changes between July 2018 and July 2019. One component of population changes is migration between the states. The new Census data show that Americans are continuing to move from high‐​tax to low‐​tax states.

This Cato study examined interstate migration using IRS data and found that people are moving, on net, from tax‐​punishing places such as California, Connecticut, Illinois, New York, and New Jersey to tax‐​friendly places such as Florida, Idaho, Nevada, Tennessee, and South Carolina. The Census data confirms the trends.

In the chart, each blue dot is a state. The vertical axis shows the one‐​year Census net interstate migration figure as a percent of 2018 state population. The horizontal axis shows state and local household taxes as a percent of personal income in 2017. Household taxes include individual income, sales, and property taxes. The red line is a fitted regression line.


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February 14, 2020 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (13)

Friday, December 20, 2019

Corporate Tax Dodging Happens Because Congress Allows It to Happen

Institute on Taxation and Economic Policy, Corporate Tax Dodging Happens Because Congress Allows It to Happen:

Trump TaxAs usual, corporate spokespersons and their allies are trying to push back against ITEP’s latest study showing that many corporations pay little or nothing in federal income taxes. One way they respond is by stating that everything they do is perfectly legal. This is an attempt by the corporate world to change the subject. The entire point of ITEP’s study is that Congress has allowed corporations to avoid paying taxes, and that this must change.

Anyone who reads ITEP’s corporate study will find detailed explanations of how Congress must change the law to ensure that corporations pay. Alright, we get it, the study is a little long. For your convenience, we also provided a two-page executive summary, and you will find that the recommendations on the second page all involve Congress changing those very laws that corporations use to avoid taxes.

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December 20, 2019 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (2)

Thursday, December 19, 2019

Wharton: Weighing The Costs And Benefits Of A Middle Class Tax Cut

Knowledge@Wharton, A Middle-class Tax Cut: Weighing the Costs and Benefits:

WhartonWharton’s Jennifer Blouin speaks with Wharton Business Daily on Sirius XM about the potential for “Tax Cuts 2.0” by the Trump administration.

In the run-up to the 2020 Presidential elections, the possibility that the Trump administration might offer a middle-class tax rate cut to 15% has set economists and other experts weighing the costs and benefits of such a move as well as its political implications.

To be sure, a tax rate cut to 15% for middle-income individuals would impose a higher burden on the federal debt, which is already weighed down by the 2017 tax cuts for corporations and individuals, according to experts at the Penn Wharton Budget Model (PWBM), a non-partisan research organization. Still, it would also inject a short-term boost and steady economic gains over the long run, they said.

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December 19, 2019 in Scholarship, Tax, Tax News, Think Tank Reports | Permalink | Comments (0)

Saturday, December 14, 2019

Penn Wharton: Warren's Wealth Tax Would Raise $1.5 Trillion Less Revenue, Reduce GDP And Wages

Penn Wharton Budget Model, Senator Elizabeth Warren's Wealth Tax: Projected Budgetary and Economic Effects:

Penn Wharton Budget ModelPenn Wharton Budget Model (PWBM) projects that Senator Warren’s proposed wealth tax, if implemented in 2021, would raise between $2.3 trillion (including macroeconomic effects) and $2.7 trillion (not including macroeconomic effects) in additional revenue in the 10-year window 2021 - 2030 while reducing GDP in 2050 by about 1 to 2 percent, depending on how the money is spent.

  • Senator Elizabeth Warren has proposed a wealth tax equal to 2 percent of net worth above $50 million and 6 percent of net worth above $1 billion, which her campaign estimates would raise $3.75 trillion over 10 years.
  • PWBM estimates that the proposal would raise about $2.7 trillion over fiscal years 2021-2030, not including macroeconomic effects. Including macroeconomic effects, PWBM estimates that the proposal would raise about $2.3 trillion over the same period.
  • PWBM projects that the proposal would reduce GDP by 0.9 percent in 2050 under the standard budget scoring convention that additional revenues reduce the deficit. If the revenues were instead spent on public investments, PWBM projects GDP in 2050 would fall between 1.1 and 2.1 percent, depending on the productivity of the investment. Average hourly wages in the economy in 2050, including wages earned by households not directly subject to the wealth tax, would fall between 0.8 and 2.3 percent due to the reduction in private capital formation.

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December 14, 2019 in Tax, Tax News, Think Tank Reports | Permalink | Comments (1)

Tuesday, December 10, 2019

OECD: Trump’s Tax Cuts Push U.S. Tax Burden To Near World's Lowest

Wall Street Journal, Trump’s Tax Cuts Push U.S. Burden Lower in World:

President Trump’s 2017 tax cuts reduced the U.S. tax burden to one of the lowest among major world economies, according to a Thursday report [Revenue Statistics 2019] by an intergovernmental organization.

U.S. tax burdens dropped by the largest amount among those countries in 2018, and the U.S. now has lower taxes than all but three countries in the Organization for Economic Cooperation and Development, the report said.


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December 10, 2019 in Gov't Reports, Tax, Tax News, Tax Scholarship, Think Tank Reports | Permalink | Comments (1)

Sunday, December 8, 2019

Close The Tax Gap By Ensuring Pass-Throughs Pay More Taxes They Owe

Samantha Jacoby (Center on Budget and Policy Priorities), Policymakers Should Ensure Pass-Throughs Pay More of Taxes They Owe:

High-income taxpayers drive much of the “tax gap” — the gap between what taxpayers owe and what they voluntarily pay on time — finds a new paper from Professor Natasha Sarin and former Treasury Secretary Lawrence Summers [Shrinking the Tax Gap: Approaches And Revenue Potential], citing new IRS data for 2011 to 2013. That’s unsurprising, because the tax gap’s single largest source is the underreporting of pass-through income (income from sources such as S corporations, partnerships, and sole proprietorships), which overwhelmingly flows to wealthy households. IRS auditors looking to curb tax evasion as well as policymakers looking to close tax loopholes should make pass-throughs a prime target. ...

Taxpayers who didn’t file a return and those underpaying the IRS accounted for 20 percent of the gross tax gap, and income underreporting the other 80 percent, the latest IRS data show. Pass-throughs accounted for nearly half (44 percent) of the underreporting gap, counting both underreported income and self-employment taxes.


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December 8, 2019 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (2)

Wednesday, November 27, 2019

Most Wealth Taxation Is Voluntary; We Need To Make It Mandatory

Washington Post op-ed:  Most Wealth Taxation on the Rich Is Essentially Voluntary. That Must Change., by Jared Bernstein:

As a result of the Democratic primary, we’re having a robust debate about taxing wealth. The debate invokes tricky technical and legal issues, but it’s an overdue one: There are good reasons the United States needs to start taxing wealth.

You may think we already tax wealth, but that’s mostly not the case. As my colleagues at the Center on Budget and Policy Priorities, Chuck Marr, Samantha Jacoby and Kathleen Bryant, point out in an important new paper [Substantial Income of Wealthy Households Escapes Annual Taxation Or Enjoys Special Tax Breaks], for the very wealthy, taxes are essentially voluntary.

How can that be, when the rest of us have taxes withheld from our paychecks every few weeks, and then often pay more when we file our income taxes every April? Because wealth accumulation isn’t taxed unless you decide to sell the asset, and even then, it’s taxed at a favorable rate, compared with regular income.

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November 27, 2019 in Tax, Tax News, Tax Scholarship, Think Tank Reports | Permalink | Comments (4)

Claims That Taxes On The Rich Will Slow Economic Growth Are Fundamentally Flawed

Josh Bivens (Economic Policy Institute), Analyses Claiming That Taxes On Millionaires and Billionaires Will Slow Economic Growth Are Fundamentally Flawed:

EPIIn recent weeks, a number of policy analyses [by the Penn Wharton Budget Model and the Tax Foundation] of progressive economic policies—a surtax on high-incomes, a wealth tax, and Social Security expansion—have claimed these policies would damage economic growth. Policymakers should give these analyses very little weight in debates about these issues, for a number of reasons.

First, and most important, is the fact that all of these analyses are grounded in an economic view of the world that sees growth as constrained by the economy’s productive capacity (or the supply side of the economy) and not by the spending of households, businesses and government (the economy’s demand side). These estimates have other problems too—they are not even particularly convincing supply-side estimates and even if the economy’s growth really was constrained by supply, these estimates would still be misleading about the effects of these policies on welfare. But the biggest reason why policymakers should give these analyses zero weight is because they assume that growth is almost never demand-constrained. ...

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November 27, 2019 in Tax, Tax News, Tax Scholarship, Think Tank Reports | Permalink | Comments (0)

Tuesday, November 19, 2019

Tax Justice Is Gender Justice: Advancing Gender And Racial Equity By Harnessing The Power Of The U.S. Tax Code

The Atlantic, Tax the Patriarchy:

The Rube Goldberg mess of the United States tax code picks winners and losers as it raises trillions of dollars for the federal government. It advantages unearned income over earned income. It advantages big, mortgaged homes over little, rented apartments. It advantages the richest of the rich over the merely rich. And, in many cases, it advantages men over women.

That last claim is the contention of three new reports produced by the National Women’s Law Center and several other research and advocacy groups. They analyze the tax code through the lens of gender and conclude that many provisions reflect, amplify, and entrench long-standing disparities between men and women.

But it need not be so. The tax code has profound power to close the gender wage-and-wealth gap, as well as to support equality in the workplace and help families thrive at home. As the country debates taxing billionaires out of existence, it might consider taxing the patriarchy out of existence, too.

National Women's Law Center, Tax Justice Is Gender Justice: Advancing Gender and Racial Equity by
Harnessing the Power of the U.S. Tax Code:

The tax code sets the rules that shape our economy, reflecting and perpetuating notions of who and what our society values. It’s an opportunity to fight inequality. But today’s tax code contains outdated and often biased assumptions about family structures, marriage, participation in the paid workforce, and more that work together to perpetuate structural barriers against women, families with low incomes, and people of color. The tax code can be a barrier for realizing gender justice – but it can also be a tool. It’s time we take advantage.

NWL Three

Ariel Jurow Kleiman (San Diego), Amy Matsui (National Women’s Law Center) & Estelle Mitchell (National Women’s Law Center), The Faulty Foundations of the Tax Code: Gender and Racial Bias in Our Tax Law:

This report ... examines the outdated assumptions and gender and racial biases embedded in the U.S. tax code. It highlights tax code provisions that reflect and exacerbate gender disparities, with particular attention to those that disadvantage women with low incomes, women of color, members of the LGBTQ community, people with disabilities, and immigrants.

  • Examined policies include the joint filing of spousal income, treatment of informal caregiving, incentives for business formation and wealth accumulation, and IRS enforcement patterns. 
  • Although perhaps facially neutral, many of these policies likely provide disproportionate benefit to men, may heighten pressure for women to leave the formal labor market, and reflect biased assumptions about gender, race, and family structure. 
  • This report offers recommendations for better data and analysis so that policymakers, advocates, and the public can fully understand the impact of the current tax code and proposed tax policies.

Katy Milani (Roosevelt Institute), Melissa Boteach (National Women’s Law Center), Steph Sterling, (Roosevelt Institute) & Sarah Hassmer (National Women’s Law Center), Reckoning With the Hidden Rules of Gender in the Tax Code: How Low Taxes on Corporations and the Wealthy Impact Women’s Economic Opportunity and Security:

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November 19, 2019 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (3)

Sunday, November 17, 2019

NY Times: Warren Wealth Tax Would Slow Economic Growth By 13% According To Penn Wharton Budget Model

New York Times, Warren Wealth Tax Could Slow Economy, Early Analysis Finds:

Penn Wharton Budget ModelSenator Elizabeth Warren’s proposed wealth tax would slow the United States economy, reducing growth by nearly 0.2 percentage points a year over the course of a decade, an outside analysis of the plan estimates.

The preliminary projection from the Penn Wharton Budget Model, which was unveiled on Thursday in Philadelphia, is the first attempt by an independent budget group to forecast the economic effects of the tax that has become a centerpiece of Ms. Warren’s campaign for the Democratic presidential nomination.

The assessment found that if the tax raised as much new federal revenue as Ms. Warren intends, and if the proceeds went toward reducing the federal debt, annual economic growth would slow from an average of 1.5 percent to an average of just over 1.3 percent over a decade.

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November 17, 2019 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (0)

Thursday, October 31, 2019

Taxing High Incomes: A Comparison Of 41 Countries

Tax Foundation, Taxing High Incomes: A Comparison of 41 Countries:

  • This report compares top effective marginal tax rates on labour income in 41 OECD and EU countries.
  • The top effective marginal tax rate is the total tax paid on the last dollar earned by a high-earning worker, taking social security contributions and consumption taxes into account in addition to income taxes. It is a measure of the degree of progressivity and redistribution in the tax system. As such, it is of great policy interest.
  • The highest marginal tax rate is found in Sweden, 76 percent, and the lowest in Bulgaria, 29 percent.
  • In general, the Nordic and the Western European countries have the highest effective tax rates.

Top Effective Marginal Tax Rates in 2019 and Their Composition
Tax Foundation

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October 31, 2019 in Scholarship, Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (4)

Monday, October 21, 2019

Taxing The “Rich” Won’t Pay For Politicians’ Promises

Manhattan Institute, Issues 2020: Taxing the “Rich” Won’t Pay for Politicians’ Promises:

The Narrative

"I believe that we should be asking the very wealthiest people in this country to start paying their fair share of taxes. That way, we will not only lower the deficit, but we will bring in enough revenue to invest in our economy and create the millions of new jobs we desperately need."[1]
— Bernie Sanders

"My vision for Medicare-for-All does not include a middle-class tax hike. I’m not prepared to do that."[2]
— Kamala Harris

"If we have enough money to pay for tax breaks for corporations. We have enough to invest in Medicare-for-All, Green New Deal and cancel student debt."[3]
— Ilhan Omar


Politicians claim that agendas costing approximately $40 trillion over 10 years can be financed mostly by taxing wealthy families and corporations. Essentially, they promise a European-style welfare state without Europe’s burdensome taxes on middle- and lower-income earners. This is not possible.

Combining popular proposals to tax the wealthiest Americans and corporations would likely raise $3.9 trillion over the decade. This revenue could not even eliminate half the $15.5 trillion budget deficit that is already projected over the next decade, much less pay for $40 trillion in more spending. The overwhelming majority of new tax revenue to finance such expenditures would have to be raised from the middle- and lower-income earners.


Key Findings

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October 21, 2019 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (0)

Tuesday, October 1, 2019

The Financial Transaction Tax: A Progressive Tax With Beneficial Effects

Public Citizen, A Progressive Tax With Beneficial Effects:

A Small Levy on Financial Transactions Would Steer Clear of Struggling Americans, Raise Meaningful Revenue, and Possibly Retire An Abusive Wall Street Industry

A small tax on financial transactions, such as a one-tenth of 1 percent levy on the purchase of stocks and bonds, would likely end the viability of high-frequency trading while raising consequential sums for the U.S. Treasury. Opponents of this proposal have claimed it would hinder the ability of middle-class families to save for retirement. In contrast, we conclude that the costs of a modest financial transaction tax (FTT) would be little to nothing for middle-income families and would be easily manageable for average families in top income bracket.


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October 1, 2019 in Tax, Tax News, Think Tank Reports | Permalink | Comments (4)

Tuesday, September 10, 2019

IMF: The Rise Of Phantom Foreign Direct Investments And The Fall Of Global Tax Enforcement

Jannick Damgaard, Thomas Elkjaer & Niels Johannesen (IMF), The Rise of Phantom Investments: Empty Corporate Shells in Tax Havens Undermine Tax Collection in Advanced, Emerging Market, and Developing Economies:

According to official statistics, Luxembourg, a country of 600,000 people, hosts as much foreign direct investment (FDI) as the United States and much more than China. Luxembourg’s $4 trillion in FDI comes out to $6.6 million a person. FDI of this size hardly reflects brick-and-mortar investments in the minuscule Luxembourg economy. So is something amiss with official statistics or is something else at play?

FDI is often an important driver for genuine international economic integration, stimulating growth and job creation and boosting productivity through transfers of capital, skills, and technology. Therefore, many countries have policies to attract more of it. However, not all FDI brings capital in service of productivity gains. In practice, FDI is defined as cross-border financial investments between firms belonging to the same multinational group, and much of it is phantom in nature—investments that pass through empty corporate shells. These shells, also called special purpose entities, have no real business activities. Rather, they carry out holding activities, conduct intrafirm financing, or manage intangible assets—often to minimize multinationals’ global tax bill. Such financial and tax engineering blurs traditional FDI statistics and makes it difficult to understand genuine economic integration.


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September 10, 2019 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (1)

Monday, September 9, 2019

The Current State Of Sales Tax On Digital Products

Rice University Baker Institute for Public Policy, The Current State of Sales Tax on Digital Products:

Baker InstituteRecent technological advancements have transformed how people conduct their daily activities. These changes are not only affecting how people live and work, but they are also redefining how people entertain and learn. Today, it is common to remotely access files stored in Dropbox, read e-books downloaded on Kindle, watch TV shows streamed from Netflix or Hulu, and listen to music through Spotify. These technological developments are making state tax authorities assess the taxability of digital products. This report reviews the current landscape of state sales tax on digital products, court cases, administrative actions, congressional proposals, and potential future developments in the taxation of digital products. ...

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September 9, 2019 in Tax, Tax Scholarship, Think Tank Reports | Permalink | Comments (0)

Monday, September 2, 2019

Marginal Tax Rates For Pass-through Businesses Vary By State: 32.7% In TX, FL; 46.1% In CA

Tax Foundation, Marginal Tax Rates for Pass-through Businesses Vary by State

Pass-through businesses—businesses like sole proprietorships, S corporations, and partnerships that “pass” their income “through” to their owner’s income tax returns and pay the ordinary individual income tax—make up a majority of U.S. businesses. Marginal tax rates vary for pass-throughs depending upon the state in which they operate because of differences in how states tax individual income.

Pass-through businesses’ marginal tax rates vary by state, from a low of 32.7 percent (in seven states) to a high of 46.1 percent (in California). These rates include both state and federal taxes.

Tax Foundation

See also Libin Zhang (Roberts & Holland, New York), Marginal Income Tax Rates of the Passthrough Business Deduction, 159 Tax Notes 1139 (May 21, 2018).

September 2, 2019 in Tax, Tax News, Think Tank Reports | Permalink | Comments (3)

Monday, June 10, 2019

Ending Special Tax Treatment For The Very Wealthy

Alexandra Thornton & Galen Hendricks (Center for American Progress), Ending Special Tax Treatment for the Very Wealthy:

Over the past several decades, as concentrations of income and wealth have approached historic levels, taxes on the very wealthy have not kept up. In fact, taxes on the ultrarich have gone in the opposite direction. Tax changes enacted since the 1980s, including the recent Tax Cuts and Jobs Act (TCJA) passed in December 2017, have eroded taxes on the people who have benefited the most from the economy, thereby aiding and abetting the widely acknowledged and troubling increase in wealth inequality. These changes have worsened a structural defect in the U.S. tax code—specifically, its failure to tax massive accumulations of wealth.

Figure 1 Figure 2<

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June 10, 2019 in Tax, Think Tank Reports | Permalink | Comments (8)

Friday, January 11, 2019

2019 Tax Trends

Tax Foundation logoTax Foundation, Tax Trends Heading Into 2019:

  1. State tax changes are not made in a vacuum. States often adopt policies after watching peers address similar issues. Several notable trends in tax policy have emerged across states in recent years, and policymakers can benefit from taking note of these developments.
  2. The enactment of the federal Tax Cuts and Jobs Act (TCJA) expanded many states’ tax bases and drove deliberations on tax conformity. At year’s end, only five states conform to an older version of the federal tax code, though many have yet to resolve issues raised by their tax conformity regimes.
  3. Several states experimented with mechanisms to allow their high-income taxpayers to avoid the new cap on the state and local tax (SALT) deduction, efforts cast into doubt–though not entirely ended–by draft U.S. Treasury regulations.
  4. Three states and the District of Columbia cut corporate taxes in 2018, with rate reductions pending in two other states. Reductions in other taxes on capital are ongoing as well, with Mississippi beginning the phaseout of its capital stock tax.
  5. The U.S. Supreme Court’s Wayfair v. South Dakota decision ushered in a new era of sales taxes on e-commerce and other remote sales, but many states have yet to implement the provisions the Court strongly suggested would protect such tax regimes from future legal challenges.
  6. A second state (Arizona) adopted a constitutional amendment banning the expansion of the sales tax to additional services, with similar efforts–which have the effect of locking an outdated sales tax base in place–expected to emerge in other states in 2019 and beyond.
  7. A court ruling has states scrambling to legalize and tax sports betting, while shifting public attitudes continue to render the legalization and taxation of marijuana an attractive revenue option in a growing number of states. In 2018, seven states adopted sports betting taxes, while two legalized and taxed marijuana.
  8. States continue to grapple with the appropriate taxation, if any, of e-cigarettes, with two states adopting taxes at rates reflective of vapor products’ potential for harm reduction, while the District of Columbia increased its tax to a punitive 96 percent rate.
  9. Business head taxes came out of nowhere to become a key consideration for several cities, particularly those with thriving tech sectors.
  10. Consideration of gross receipts taxes continue as corporate income tax revenues decline, though concerns about their economic effects have generally helped stave off their adoption.
  11. Two states repealed their estate taxes in 2018, continuing a decade-long trend away from taxes on estates and inheritances.
  12. Revenue triggers, a relatively modern innovation, again featured prominently in tax reform packages and will continue to do so. 

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January 11, 2019 in Tax, Think Tank Reports | Permalink | Comments (0)

Tuesday, December 18, 2018

Taxing Teens: Working Children, Family Businesses, And The Kiddie Tax

Baker InstituteRice University Baker Institute for Public Policy, Taxing Teens: Working Children, Family Businesses, and the Kiddie Tax:

Being able to manage money is an important life skill, but many American youth are not well prepared to do so. A recent Organisation for Economic Co-operation and Development (OECD) study shows that more than 20% of U.S. high school students do not possess basic levels of financial literacy. This means they can at best identify basic financial products such as invoices or make simple decisions on every day spending. But the ability to create a simple budget, conduct calculations in percentages, appreciate compound interest on savings or loans, and understand income taxes are all beyond their comprehension.

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December 18, 2018 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, December 6, 2018

How Should We Tax The Sharing Economy?

Baker InstituteRice University Baker Institute for Public Policy, How Should We Tax the Sharing Economy?:

Walking out of the airport lobby and getting into an Uber car booked through an app on a smartphone, hiring a handyman through the TaskRabbit website to repair a leaking kitchen sink, searching vacation rental accommodations on Airbnb—none of these functions was possible a decade ago. Yet today, with the development and growth of the sharing economy—which includes a number of mostly online enterprises that match service providers with clients—these are common transactions. This report reviews key federal tax considerations for companies and workers as the sharing economy becomes more prevalent.

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December 6, 2018 in Tax, Think Tank Reports | Permalink | Comments (0)

Tuesday, October 30, 2018

Can the TCJA Save The Corporate Income Tax?

Baker InstituteRice University Baker Institute for Public Policy, Can the TCJA Save the Corporate Income Tax?:

The tax cuts passed by Congress and signed into law by President Trump last year offer a starting point offer for revitalizing the corporate income tax (CIT), according to experts at Rice University’s Baker Institute for Public Policy.

Jorge Barro and Joyce Beebe, fellows in public finance, outlined their insights in a new issue brief,  Can the TCJA Save the Corporate Income Tax?. The brief provides a historical overview of the CIT, its key provisions and the implications of the 2017 Tax Cuts and Jobs Act (TCJA) for businesses. 

"Before the TCJA, the CIT was one of the most criticized taxes in the U.S.,” the authors wrote. “The statutory tax rate was high, the tax base was narrow and the tax could be avoided by switching to a different business structure or by shifting corporate profits to a different jurisdiction. However, practical and theoretical considerations indicate that the CIT is here to stay. Therefore, reform instead of repeal has long been the focus of CIT discussions."

The corporate income tax share of total federal government revenues has been steadily declining since the end of World War II.

Baker 1

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October 30, 2018 in Tax, Think Tank Reports | Permalink | Comments (0)

Thursday, October 25, 2018

2018 International Tax Competitiveness Index

ITCA2018 International Tax Competitiveness Index:

The International Tax Competitiveness Index ( ITCI ) seeks to measure the extent to which a country’s tax system adheres to two important aspects of tax policy: competitiveness and neutrality. A competitive tax code is one that keeps marginal tax rates low. In today’s globalized world, capital is highly mobile. Businesses can choose to invest in any number of countries throughout the world to find the highest rate of return. This means that businesses will look for countries with lower tax rates on investment to maximize their after-tax rate of return. If a country’s tax rate is too high, it will drive investment elsewhere, leading to slower economic growth. In addition, high marginal tax rates can lead to tax avoidance. ...

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

Table 1: 2018 International Tax Competitiveness Index Rankings
Country Overall Rank Overall Score Corporate Tax Rank Individual Taxes Rank Consumption Taxes Rank Property Taxes Rank International Tax Rules Rank
Estonia 1 100.0 1 1 9 1 6
Latvia 2 86.0 2 2 27 6 5
New Zealand 3 83.0 18 3 6 3 15
Luxembourg 4 80.5 21 17 2 18 1
Netherlands 5 77.5 19 8 12 10 3
Switzerland 6 77.0 6 9 1 34 8
Sweden 7 75.0 7 20 16 7 7
Australia 8 72.2 27 19 7 4 17
Czech Republic 9 69.6 8 4 33 13 9
Austria 10 69.6 15 21 10 9 13
Slovak Republic 11 69.4 10 6 32 2 27
Turkey 12 68.8 17 5 24 17 10
Hungary 13 68.4 3 15 34 26 2
Finland 14 67.7 5 27 14 11 18
Norway 15 66.2 13 11 18 24 14
Germany 16 65.3 24 28 11 14 11
Korea 17 64.4 28 10 5 25 31
Canada 18 64.0 22 23 8 20 22
Belgium 19 63.8 23 7 25 23 12
Ireland 20 63.7 4 33 23 12 21
Denmark 21 63.7 14 30 17 8 23
Slovenia 22 63.6 12 12 28 21 16
United Kingdom 23 63.1 16 24 22 30 4
United States 24 61.5 20 26 4 28 32
Iceland 25 60.2 11 31 19 22 20
Japan 26 59.5 35 25 3 29 25
Spain 27 57.4 26 18 15 31 19
Mexico 28 57.2 31 13 26 5 34
Greece 29 51.9 25 14 30 27 29
Israel 30 51.7 29 35 13 15 33
Chile 31 48.3 30 22 29 16 35
Portugal 32 48.2 33 29 31 19 28
Poland 33 47.7 9 16 35 32 30
Italy 34 46.9 32 32 20 33 26
France 35 41.4 34 34 21 35 24

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October 25, 2018 in Tax, Think Tank Reports | Permalink | Comments (1)

Monday, October 1, 2018

Evaluating the Changed Incentives for Repatriating Foreign Earnings

Erica York (Tax Foundation), Evaluating the Changed Incentives for Repatriating Foreign Earnings:

Prior to the Tax Cuts and Jobs Act (TCJA), the tax code created major disincentives for U.S. companies to repatriate their earnings, or bring earnings made overseas back to the United States. Changes in the TCJA eliminate these disincentives, thus, going forward, companies do not face the old barriers which discouraged repatriation.

Due to the old disincentives, companies had built up large amounts of earnings abroad. Given the change in the incentives, many have speculated that this will lead companies to repatriate large shares of the earnings that they have been holding overseas. While we have seen a significant uptick in repatriation since enactment of the TCJA, it’s important to understand the context and intent of the TCJA’s reforms, as well as the composition of the cash held abroad, to appropriately analyze the effects of deemed repatriation.

Tax Foundation

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October 1, 2018 in Tax, Think Tank Reports | Permalink | Comments (0)

Wednesday, September 12, 2018

Trump Tax Cuts Will Spur Even Greater Migration From High-Tax States To Low-Tax States

Chris Edwards (Cato Institute), Tax Reform and Interstate Migration:

This report looks at changes to individual income taxes, particularly the state and local tax (SALT) deduction. The 2017 tax law cut individual tax rates and roughly doubled standard deductions, but it also imposed a $10,000 cap per return on SALT deductions. Those changes are expected to reduce the number of households that deduct state and local income, sales, and property taxes from 42 million in 2017 to 17 million in 2018.

Millions of households will feel a larger bite from state and local taxes and will thus become more sensitive to tax differences between the states. The tax law may prompt an outflow of mainly higher-earning households from higher-tax states to lower-tax states.

Even before the new tax law, a substantial number of Americans were moving from higher-tax to lower-tax states. Looking at migration flows between the states in 2016, almost 600,000 people with aggregate income of $33 billion moved, on net, from the 25 highest-tax states to the 25 lowest-tax states in that single year. 

Of the 25 highest-tax states, 24 of them had net outmigration in 2016. Of the 25 lowest-tax states, 17 had net in-migration. The largest out-migration is from high-tax New York, whereas the largest in-migration is to low-tax Florida. Florida is enjoying an influx of wealthy entrepreneurs and retirees looking for a tax climate that boasts no income tax or estate tax.

Figure 1

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September 12, 2018 in Tax, Think Tank Reports | Permalink | Comments (2)

Wednesday, August 15, 2018

New Law Has Made The Tax System More Progressive

Goodman Institute for Public Policy Research, Study: Most of The Benefits of Tax Reform Are Not Going to The Wealthy:

Although widely reported in the national news media, the claim that most of the benefits of tax reform are going to the wealthy is wrong according to economists whose ideas were used in shaping the legislation that was enacted last year.

In a report for the Goodman Institute, Boston University economist Laurence Kotlikoff says that under the new tax regime, the top 1 percent of income earners will actually bear a larger share of the tax burden than they did under the previous system.

“There was no give-away to the rich,” he said. “If anything, the tax system has gotten slightly more progressive.”

The Tax Policy Center (sponsored by the Brookings Institution and the Urban Institute) says that 82.8% of the benefits of tax reform will accrue to the wealthiest taxpayers.  But according to, that claim is more than misleading. The Center’s own numbers show that if the individual tax cuts are made permanent, the share going to the top 1 percent will receive 25.3% of the benefits. And most people in Washington think the tax cuts for individuals will be made permanent.

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August 15, 2018 in Tax, Think Tank Reports | Permalink | Comments (2)

Tuesday, July 17, 2018

Democratic Criticism Of The 2017 Tax Act Grows More Incoherent

E21Brian Riedl (Manhattan Institute), Criticism of Tax Cuts Grows More Incoherent:

The 2017 Tax Cuts and Jobs Act (TCJA) remains controversial, with public opinion evenly split and many Democrats campaigning on repeal. However, the Democratic critique of the tax cuts has grown increasingly incoherent. The party excoriates the “tax cuts for the rich” while trying to tilt them even further to the wealthy. Democrats slam the deficit effect of the tax cuts while working to worsen budget deficits. In addition, they erroneously describe the law as a “middle-class tax hike” while proposing policies that would truly raise middle-class taxes. ...

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July 17, 2018 in Tax, Think Tank Reports | Permalink | Comments (2)