The cap on federal tax deductions for state and local taxes (SALT) that is in effect now under the Tax Cuts and Jobs Act (TCJA) is a flawed provision but repealing it outright would be costly and provide a windfall to the rich. Congress should consider replacing the SALT cap with a different type of limit on deductions that would avoid both of these outcomes. Using the ITEP microsimulation tax model, this report provides revenue estimates and distributional estimates for several such options, assuming they would be in effect in 2019.
Federal Policy
ITEP’s federal policy resources provide quantitative and qualitative research and analysis on current tax policies, proposals and reform options. Its distributional analyses highlight how tax proposals will affect low-income, middle-class and wealthy Americans nationally and in all 50 states.
ITEP's Federal Policy Research Priorities
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report November 14, 2018 A Fair Way to Limit Tax Deductions
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blog November 13, 2018 Three Tax Takeaways on Amazon’s Expansion Announcement
Today Amazon announced major expansions in New York and Virginia, where it intends to hire up to 50,000 full-time employees. The announcement marks the culmination of a highly publicized search that lasted more than a year and involved aggressive courting of the company by cities across the nation. The following are three tax-related observations on the announcement.
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blog November 13, 2018 15 Companies Report an Average 10.4 Percentage Point Drop in Effective Tax Rates Since 2017
Comparing the year’s first three quarterly filings of 2018 with those of 2017, we find that 15 of the largest Fortune 500 companies reported worldwide effective income tax rates declining by an average of 10.4 percentage points and by as much as 16 percentage points. In total these companies owed $22.3 billion less in taxes than they would have under their 2017 effective rates, saving an average of $1.5 billion each.
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blog November 8, 2018 The Post-Midterms Tax Policy Outlook: Small Ball and Real Tax Reform Debate
With most of the results of the 2018 midterm elections in, the broad landscape for federal tax policy over the next couple years is coming into view. Democratic control of the House and Republican control of the Senate means a significant tax overhaul is unlikely, but minor tax changes may happen. And the run-up to the 2020 presidential election will force more robust debate over the impact of the Tax Cuts and Jobs Act (TCJA) and what aspects of the legislation should be repealed, reformed, or built upon.
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blog November 5, 2018 New Report Finds Tax Transparency Is Not Just Ethical: It Has a Real Fiscal Impact
A new report by Hubertus Wolff and Michael Overesch finds that public country-by-country reporting (CBCR) can have a significant fiscal impact. In fact, the report shows that new CBCR rules applied to European banks appear to have substantially increased the tax rates paid by banks that engage in tax-haven activities. This means that CBCR may not just improve the integrity of the tax system and provide critical information so investors can gauge investment risks, but may also have a much more immediate impact on curbing tax avoidance.
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blog November 5, 2018 Post-TCJA, International Corporate Tax System Still Leaking Hundreds of Billions in Profits
A recently released working paper from Kimberley Clausing of Reed College finds that U.S. corporations will avoid taxes on nearly $300 billion in offshore profits every year for the foreseeable future. The paper provides an informative new look into the level of offshore tax avoidance before and after the Tax Cuts and Jobs Act (TCJA). While advocates of the TCJA claimed the tax law would end tax haven abuse through lowering the statutory rate and other measures, Clausing’s analysis shows that the TCJA will still allow the vast majority of offshore tax avoidance to remain intact.
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November 5, 2018 Comments to be delivered during IRS hearing on “Contributions in Exchange for State or Local Tax Credits” (REG-112176-18)
ITEP views this proposal as a sensible improvement, and one that is actually overdue, to the way the charitable deduction is administered. At the end of my remarks I will discuss a few ways that the regulation could be improved. But the core point I want to emphasize is that the general approach taken here, where quid pro quo rules are applied in a broad-based fashion to all significant state and local tax credits, is the correct one.
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blog October 24, 2018 Shaking up TCJA: How a Proposed New Credit Could Shift Federal Tax Cuts from the Wealthy and Corporations to Working People
A new federal proposal, the Livable Incomes for Families Today (LIFT) the Middle Class Act, would create a new refundable tax credit for low- and middle-income working families who were little more than an afterthought in last year’s federal tax overhaul. This proposal would take the place of TCJA, providing tax cuts similar in cost to the recent federal tax law but targeted toward working people rather than the wealthy. ITEP analyzed the bill, proposed by California Senator Kamala Harris, and compared its potential impact to TCJA.
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blog October 23, 2018 Tax Policies Have Increased Inequality, and So Would Entitlement Cuts
Conversations about economics often take place on different planets, it seems. Economists and analysts note rising inequality in America. And it’s not just lefty analysts. The credit ratings firm Moody’s chimed in earlier this month, warning that inequality “is a key social consideration that will impact the U.S.’ credit profile through multiple rating factors, including economic, institutional and fiscal strength.”
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blog October 18, 2018 Lawmakers Want Working People to Foot the Bill for Top-Heavy Tax Cuts
Earlier this week, the Treasury Department reported that the federal deficit this fiscal year climbed by 17 percent to $779 billion, and next year is expected to be at least $1 trillion.
The increased deficit comes after Congress last December passed an unpopular tax cut (The Tax Cuts and Jobs Act) that will cost nearly $2 trillion over a decade. GOP leaders repeatedly claimed the measure would pay for itself and not increase annual deficits, in spite of multiple economic predictions to the contrary.
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report October 11, 2018 ITEP Comments and Recommendations on Proposed Section 170 Regulation (REG-112176-18)
The IRS recently proposed a commonsense improvement to the federal charitable deduction. If finalized, the regulation would prevent not just the newest workarounds to the $10,000 deduction for state and local taxes (SALT), but also a longer-running tax shelter abused by wealthy donors to private K-12 school voucher programs. ITEP has submitted official comments outlining four key recommendations related to the proposed regulation.
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report October 11, 2018 Race, Wealth and Taxes: How the Tax Cuts and Jobs Act Supercharges the Racial Wealth Divide
A newly released report by Prosperity Now and the Institution on Taxation and Economic Policy, Race, Wealth and Taxes: How the Tax Cuts and Jobs Act Supercharges the Racial Wealth Divide, finds that the TCJA not only adds unnecessary fuel to the growing problem of overall economic inequality, but also supercharges an already massive racial wealth divide to an alarming extent.
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blog October 10, 2018 ‘Financial Exposure’ Showcases Tax Misconduct by Powerful Individuals and Corporations
Elise J. Bean’s Financial Exposure reiterates the point that tax avoidance and tax evasion were endemic to our financial system long before allegations against a sitting president brought them to the forefront of the public consciousness.
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blog October 2, 2018 Twelve States Offer Profitable Tax Shelter to Private School Voucher Donors; IRS Proposal Could Fix This
A proposed IRS regulation would eliminate a tax shelter for private school donors in twelve states by making a commonsense improvement to the federal tax deduction for charitable gifts. For years, some affluent taxpayers who donate to private K-12 school voucher programs have managed to turn a profit by claiming state tax credits and federal tax deductions that, taken together, are worth more than the amount donated. This practice could soon come to an end under the IRS’s broader goal of ending misuse of the charitable deduction by people seeking to dodge the federal SALT deduction cap.
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press release September 28, 2018 U.S. House Advances More Unpopular Tax Cuts That Primarily Benefit the Wealthy
The U.S. House this week voted on so-called Tax Cuts 2.0, a package of three tax bills that, among other things, would make permanent temporary provisions in the Tax Cuts and Jobs Act.
Alan Essig, ITEP’s executive director, said the following: “While top-heavy tax cuts and their inevitable effect of decimating public investments may seem peripheral to today’s news cycle, they are emblematic of the governing philosophy of those in power today.”
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blog September 27, 2018 So-Called “Universal Savings Accounts” in Tax Cuts 2.0 Are a Giveaway to the Most Affluent Taxpayers
This week, House Republicans have taken up bills they call tax cuts “2.0.” Most of the attention, so far, has focused on the bill that extends—at great cost—the temporary parts of the Tax Cuts and Jobs Act (TCJA). But other legislation in the package contains provisions that make the whole deal even more tilted toward the richest households, including one that would create “Universal Savings Accounts.” Far from being universal, these new savings vehicles would benefit the same high-income households that enjoy the bulk of the tax cuts from TCJA.
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September 26, 2018 Tax Cuts 2.0 Resources
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. GOP leaders wrote the bill this way to adhere to their own rule that limits how much a piece of legislation can add to the federal debt. But it’s clear that proponents planned all along to make those provisions permanent. Less than a month after the law passed, the White House and Republican leaders began calling for a second round of tax cuts. Now, they have introduced a bill informally called “Tax Cuts 2.0” or “Tax Reform 2.0,” which would make the temporary provisions permanent. And they falsely claim that making these provisions permanent will benefit the middle class.
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September 26, 2018 Tax Cuts 2.0 – Alabama
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Alaska
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Arkansas
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Arizona
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – California
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Colorado
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Delaware
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – District of Columbia
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Florida
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Georgia
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Hawaii
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Idaho
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Illinois
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Indiana
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Iowa
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Kansas
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Kentucky
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Louisiana
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Maine
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Maryland
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Massachusetts
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Michigan
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Minnesota
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Mississippi
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Missouri
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Montana
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Nebraska
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – Nevada
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – New Hampshire
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – New Jersey
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – New York
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – New Mexico
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called… -
September 26, 2018 Tax Cuts 2.0 – North Carolina
The $2 trillion 2017 Tax Cuts and Jobs Act (TCJA) includes several provisions set to expire at the end of 2025. Now, GOP leaders have introduced a bill informally called…