Corporate income taxes in the United States as a share of the economy are well below the average among developed nations, according to an analysis of the most recent data from the Organization for Economic Cooperation and Development (OECD). Data from the OECD show that U.S. corporate taxes as a percentage of GDP are 2.2 percent, which is 24 percent less than the 2.9 percent weighted average among the 34 other OECD countries for which data were available.
Publications
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report April 10, 2017 U.S. Collects Smaller Share of Corporate Taxes Than Developed Country Average
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report April 4, 2017 Testimony before the Alaska House Labor & Commerce Committee On House Bill 36
Thank you for the opportunity to testify on the changes House Bill 36 would make to Alaska’s tax treatment of pass-through income. The taxation of pass-through business entities has been a focal point of state and federal tax reform debates for over a quarter century, with a dual focus on minimizing the role of tax laws in determining the choice of business entity and on ensuring that the income of all business entities is subject to at least a minimal tax. My testimony makes two main points:
1. Alaska is one of a small number of states that do not currently impose either an entity-level tax or a personal income tax on the income generated by pass-through businesses. 2. But Alaska fully taxes the income of traditional C corporations, creating a clear incentive for businesses to structure as pass-throughs to avoid income tax.
In the absence of a statewide personal income tax, imposing an entity-level tax on the net income of pass-through businesses, as HB36 would do, is a straightforward approach to leveling the playing field between different types of business entities, while ensuring these businesses help to fund public investments. -
report March 28, 2017 Assessing the Distributional Consequences of Alaska’s House Bill 115 (Version L)
This report contains ITEP’s analysis of the distributional and revenue consequences of the revised version of House Bill 115 (Version L) as proposed on March 23, 2017. This proposal would reduce Alaska’s Permanent Fund Dividend (PFD) payout and implement a personal income tax based on a modified version of Federal Adjusted Gross Income, with rates ranging from 0 to 7 percent. The analysis was produced using ITEP’s Microsimulation Tax Model.
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report March 28, 2017 Fortune 500 Companies Hold a Record $2.6 Trillion Offshore
All told, Fortune 500 corporations are avoiding up to $767 billion in U.S. federal income taxes by holding more than $2.6 trillion of “permanently reinvested” profits offshore. In their latest annual financial reports, 29 of these corporations reveal that they have paid an income tax rate of 10 percent or less in countries where these profits are officially held, indicating that most of these profits are likely in offshore tax havens.
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report March 17, 2017 Affordable Care Act Repeal Includes a $31 Billion Tax Cut for a Handful of the Wealthiest Taxpayers: 50-State Breakdown
Congressional Republicans have proposed legislation that would repeal the Affordable Care Act (ACA), including rolling back a number of tax changes that were enacted to pay for the ACA’s health care expansions. Among these tax changes are two targeted income tax increases that took effect in 2013, each of which apply only to a small number of the wealthiest Americans: the net investment tax and additional Medicare tax. Repealing these two taxes would cost over $31 billion a year if implemented in tax year 2016, and 85 percent of the benefit from repealing these taxes would go to the best off 1 percent of Americans nationwide.
This analysis includes a 50-state breakdown of these impacts.
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report March 15, 2017 Taxes and the On-Demand Economy
A growing number of Americans are getting rides or booking short-term accommodations through online platforms such as Uber and Airbnb. This is nothing new in concept; brokers have operated for hundreds of years as go-betweens for producers and consumers. The ease with which this can be done through the Internet, however, has led to millions of people using these services, and to some of the nation’s fastest-growing, high-profile businesses.
The rise of this on-demand sector, sometimes referred to as the “gig economy” or, by its promoters, the “sharing economy,” has raised a host of questions. For state and local governments, one of them is: How do the services provided by these companies fit into the current tax system? All three of the major categories of revenue sources relied upon by state and local governments, including consumption taxes, income taxes, and property taxes, are impacted to some extent by the on-demand economy. While Uber, Airbnb, and similar on-demand companies are still relatively small in relation to the overall U.S. economy (accounting for 0.5 percent of the U.S. workforce), they are large enough to have a meaningful impact on state tax collections, and their explosive growth and entry into new lines of business will amplify their importance in the years ahead.
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report March 9, 2017 The 35 Percent Corporate Tax Myth
Profitable corporations are subject to a 35 percent federal income tax rate on their U.S. profits. But many corporations pay far less, or nothing at all, because of the many tax loopholes and special breaks they enjoy. This report documents just how successful many Fortune 500 corporations have been at using loopholes and special breaks over the past eight years. As lawmakers look to reform the corporate tax code, this report shows that the focus of any overhaul should be on closing loopholes rather than on cutting tax rates.
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report March 1, 2017 Undocumented Immigrants’ State & Local Tax Contributions
Public debates over federal immigration reform, specifically around undocumented immigrants, often suffer from insufficient and inaccurate information about the tax contributions of undocumented immigrants, particularly at the state level. The truth is that undocumented immigrants living in the United States paybillions of dollars each year in state and local taxes. Further, these tax contributions would increase significantly if all undocumented immigrants currently living in the United States were granted a pathway to citizenship as part of comprehensive immigration reform. Or put in the reverse, if undocumented immigrants are deported in high numbers, state and local revenues could take a substantial hit.
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brief February 24, 2017 Combined Reporting of State Corporate Income Taxes: A Primer
Over the past several decades, state corporate income taxes have declined markedly. One of the factors contributing to this decline has been aggressive tax avoidance on the part of large, multi-state corporations, costing states billions of dollars. The most effective approach to combating corporate tax avoidance is combined reporting, a method of taxation currently employed in more than half of the states that tax corporate income. The two most recent states to enact combined reporting are Rhode Island in 2014 and Connecticut in 2015.
In several states, including Connecticut, Illinois, Massachusetts, Rhode Island, and Vermont, lawmakers adopted the policy after first carrying out in-depth studies of its potential effects. This policy brief explains how combined reporting works.
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report February 22, 2017 Regressive and Loophole-Ridden: Issues with the House GOP Border Adjustment Tax Proposal
In the summer of 2016, House Republicans released a blueprint for tax reform that is likely to be used as the starting point for major tax legislation in 2017.[1] One of the most radical provisions is a proposal to shift the corporate tax code from a residence-based to a destination-based system through applying a border adjustment on exports and imports. This proposal has major flaws that would make it a challenge to implement. Further, it is inherently regressive, rife with loopholes and would violate international agreements.
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report February 9, 2017 State Gasoline Taxes: Built to Fail, But Fixable
Every state levies taxes on gasoline and diesel fuel, usually just called “gas taxes.” These taxes are an important source of state revenue–particularly for transportation–but their poor design has resulted in sluggish revenue growth that fails to keep pace with state infrastructure needs. This ITEP Policy Brief explains how state gas taxes work, their importance as a transportation revenue source, the problems confronting gas taxes, and the types of gas tax reforms that are needed to overcome these problems.
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report January 31, 2017 State Tax & Revenue Information
Below is a list of notable resources for information on state taxes and revenues: Alabama Alabama Department of Revenue Alabama Department of Finance – Executive Budget Office Alabama Department of… -
report January 26, 2017 Fairness Matters: A Chart Book on Who Pays State and Local Taxes
When states shy away from personal income taxes in favor of higher sales and excise taxes, high-income taxpayers benefit at the expense of low- and moderate-income families who often face above-average tax rates to pick up the slack. This chart book demonstrates this basic reality by examining the distribution of taxes in states that have pursued these types of policies. Given the detrimental impact that regressive tax policies have on economic opportunity, income inequality, revenue adequacy, and long-run revenue sustainability, tax reform proponents should look to the least regressive, rather than most regressive, states in crafting their proposals.
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report January 25, 2017 Alaska’s Motor Fuel Tax: A National and Historical Outlier
Alaska Gov. Bill Walker recently proposed tripling his state’s motor fuel tax rates.[1] While a variety of fuel types would be affected by this proposal, three-fourths (or $60 million) of the revenue raised each year would come from higher taxes on gasoline and diesel fuel–sometimes referred to as highway fuels–purchased by Alaska motorists.
Absent any national or historical context, tripling Alaska’s gasoline and diesel fuel tax rates may sound like a radical policy change. But an adjustment of this size is necessary because Alaska lawmakers have not updated the state’s basic highway fuel tax rate since May 1970–almost 47 years ago.[2] Because of this inaction, Alaska’s highway fuel tax has become an outlier when compared to other states’ tax rates, or when compared to Alaska’s own history.
This brief discusses four ways in which Alaska’s highway fuel tax is an outlier:
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report January 18, 2017 Multinational Corporations Would Receive Half a Trillion in Tax Breaks from Trump’s Repatriation Tax Proposal
One of the central questions for lawmakers looking to reform the federal tax code this year is how to address the $2.5 trillion in earnings that U.S. companies are holding offshore to avoid taxes. Lawmakers on both sides of the aisle have supported proposals that would either require or allow companies to repatriate these earnings to the United States at a discounted tax rate. These proposals have ranged from letting companies repatriate their earnings tax-free to requiring them to immediately pay a discounted rate of 20 percent. All of the proposals would give corporations a substantial tax discount and forego much-needed revenue.
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brief January 17, 2017 Most Americans Live in States with Variable-Rate Gas Taxes
The federal government and many states are unable to adequately maintain the nation’s transportation infrastructure in part because the gasoline taxes intended to fund infrastructure projects are often poorly designed. Thirty states and the federal government levy fixed-rate gas taxes where the tax rate does not change even when the cost of infrastructure materials rises or when drivers transition toward more fuel-efficient vehicles and pay less in gas tax. The federal government’s 18.4 cent gas tax, for example, has not increased in over twenty-three years. Likewise, more than twenty states have waited a decade or more since last raising their own gas tax rates.
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brief January 17, 2017 How Long Has It Been Since Your State Raised Its Gas Tax?
Many state governments are struggling to repair and expand their transportation infrastructure because they are attempting to cover the rising cost of asphalt, machinery, and other construction materials with fixed-rate gasoline taxes that are rarely increased.
The chart accompanying this brief shows (as of January 1, 2017) the number of years that have elapsed since each state’s gas tax was last increased.
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brief December 21, 2016 State Estate and Inheritance Taxes
For much of the last century, estate and inheritance taxes have played an important role in fostering strong communities by promoting equality of opportunity and helping states adequately fund public services. While many of the taxes levied by state and local governments fall most heavily on low-income families, only the very wealthy pay estate and inheritance taxes.
Changes in the federal estate tax in recent years, however, caused states to reevaluate the structure of their estate and inheritance taxes. Unfortunately, the trend of late among states has tended toward weakening or completely eliminating them. But this need not be so; states can restore or improve their estate and inheritance taxes as a vital progressive revenue source to support services and communities while also protecting the source from the whims of federal lawmakers. This policy brief explains state inheritance and estate taxes, discusses recent state trends and policy decisions that have impacted the taxes, and explores how states can adopt or strengthen these important components of a progressive tax structure.
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report December 7, 2016 The Federal Estate Tax: A Critical and Highly Progressive Revenue Source
For years, wealth and income inequality have been widening at a troubling pace. A recent study estimated that the wealthiest 1 percent of Americans held 42 percent of the nation’s wealth in 2012, up from 28 percent in 1989. Public policies have exacerbated this trend by taxing income earned from investments at a lower rate than income from an ordinary job and by dramatically cutting taxes on inherited wealth. Further, lawmakers have done little to stop aggressive accounting schemes designed to avoid the estate tax altogether.
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report December 7, 2016 Fact Sheet: Preserving the Estate Tax
The federal estate tax is one of our most progressive sources of revenue and a critical tool in the fight against rising wealth inequality. Congressional legislation has significantly eroded the tax over the years, and now it is levied on only the wealthiest 0.2% of estates, meaning that 99.8% of estates will have no federal estate tax liability. The estate tax should be not only preserved but restored to a historical level to increase revenues and ensure more progressivity in the tax system.
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report November 30, 2016 Privatization, Waste, and Unfunded Projects: The Problems with Trump’s Infrastructure Proposal
In his acceptance speech, President-elect Donald Trump placed a heavy emphasis on the need to rebuild the nation’s infrastructure. In theory, expanded investments in our nation’s infrastructure could generate wide support among the public and within Congress. And yet Congressional negotiations on this issue have repeatedly broken down because of disagreements over how to fund those investments. Unfortunately, a flawed proposal for new funding put forth by Mr. Trump fails to offer a realistic path forward.
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brief November 28, 2016 State Tax Preferences for Elderly Taxpayers
State governments provide a wide array of tax breaks for their elderly residents. Almost every state that levies an income tax allows some form of income tax exemption or credit for citizens over age 65 that is unavailable to non-elderly taxpayers. Most states also provide special property tax breaks to the elderly. Unfortunately, too many of these breaks are poorly-targeted, unsustainable, and unfair. This policy brief surveys federal and state approaches to reducing taxes for older adults and suggests options for designing less costly and better targeted tax breaks.
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report November 28, 2016 Comprehensive Guide to “Repatriation” Proposals
Corporations falsely claim that they have to engage in offshore tax avoidance maneuvers because the U.S. corporate tax rate is too high, an argument which has unfortunately found an audience in lawmakers on both sides of the aisle. In 2017, Congress likely will evaluate a number of approaches to taxing the trillions of dollars corporations currently hold offshore. This report explains and evaluates these proposals, including a so-called repatriation holiday and deemed repatriation. Further, it explains why ending deferral of taxes on U.S. multinational corporations’ foreign earnings could halt the widespread corporate practice of funneling money to subsidiaries for the express purpose of avoiding taxes.
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report November 28, 2016 Fact Sheet: What You Need to Know About Repatriation Proposals
Fortune 500 corporations collectively have stashed $2.5 trillion in profits offshore, on which they have avoided up to $718 billion in taxes. It’s no wonder that policymakers on both sides of the aisle are weighing legislative options to either tax these profits or create an incentive for corporations to “repatriate” or bring these profits to the United States so that they are subject to taxation.
Lawmakers have introduced several “repatriation” proposals that would glean tax revenue from these offshore profits. But the only solution that will ensure corporations pay taxes on their offshore profits AND shut down the practice of stashing cash offshore is to end deferral, the tax code loophole that allows corporations to indefinitely avoid paying taxes on profits stashed offshore.
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brief November 18, 2016 Collecting Sales Taxes Owed on Internet Purchases
Retail trade has been transformed by the Internet. As the popularity of “e-commerce” (that is, transactions conducted over the Internet) has grown, policymakers have engaged in a heated debate over how state and local sales taxes should be applied to these transactions. This debate is of critical importance for states as sales taxes comprise close to one-third of all state tax revenues and hundreds of billions of dollars in retail spending is now occurring online.