Lawmakers in many states have enacted “sales tax holidays” (16 states will hold them in 2020) to provide a temporary break on paying the tax on purchases of clothing, school supplies, and other items. These holidays may seem to lessen the regressive impacts of the sales tax, but their benefits are minimal while their downsides are significant—and amplified in the context of the COVID-19 pandemic. This policy brief looks at sales tax holidays as a tax reduction device.
Publications
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brief July 29, 2020 Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
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brief July 28, 2020 New Analysis Compares HEROES Act and HEALS Act, Disaggregates Data by Race and Income
The Health, Economic Assistance, Liability Protection and Schools (HEALS) Act released by Senate Republicans Monday includes a tax rebate that is slightly more generous than the one provided under the March CARES Act, but fails to correct most of the earlier act’s problems. House Democrats addressed these shortcomings in the May HEROES Act, a better starting place for negotiations over the next round of COVID-19 relief. ITEP has analyzed both acts to provide a detailed comparison of how the tax rebate provisions would affect families across the income spectrum and by race. Both measures would provide cash payments to a majority of individuals and families, but the HEROES Act goes farther and is more inclusive.
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report July 21, 2020 An Updated Analysis of a Potential Payroll Tax Holiday
ITEP estimates that if Congress and the president eliminated all Social Security and Medicare payroll taxes paid by employers and employees from Sept. 1 through the end of the year, 64 percent of the benefits would go the richest 20 percent of taxpayers and 24 percent of the benefits would go to the richest 1 percent of taxpayers, as illustrated in the table below. The total cost of this hypothetical proposal would be $336 billion.
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report July 16, 2020 Trade Deals Aren’t Enough: Fixing the Tax Code to Bring American Jobs Back
We all need the public sector to protect public health, keep us safe, educate our children, and much more. Companies, particularly multinational corporations, could not function without the legal, infrastructure, financial, regulatory, health, and transportation resources that the government provides.
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report July 14, 2020 Who Pays Taxes in America in 2020?
Having a sound understanding of who pays taxes and how much is a particularly relevant question now as the nation grapples with a health and economic crisis that is devastating lower-income families and requiring all levels of government to invest more in keeping individuals, families and communities afloat. This year, the share of all taxes paid by the richest 1 percent of Americans (24.3 percent) will be just a bit higher than the share of all income going to this group (20.9 percent). The share of all taxes paid by the poorest fifth of Americans (2 percent) will be just a bit lower than the share of all income going to this group (2.8 percent).
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report June 30, 2020 Republican Tax Credit Proposal Would Provide New Breaks to Tax Avoiders Like Amazon and Netflix
While lawmakers of both parties and policy experts discuss various ways to respond to the continuing COVID-19 crisis and resulting economic downturn, Republicans in Congress are offering a new solution. Their idea, which is still being discussed, is to waive existing limits on business tax credits. This could benefit corporations that are profitable but that nonetheless pay no taxes or very little in taxes because of the many tax breaks and legal loopholes they already enjoy.
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report June 2, 2020 Depreciation Breaks Have Saved 20 Major Corporations $26.5 Billion Over Past Two Years
The Trump administration and its congressional allies have proposed making permanent the expensing provision in the Trump-GOP tax law. Expensing is the most extreme form of accelerated depreciation, which allows businesses to deduct the cost of purchasing equipment more quickly than it wears out. But expensing and other types of accelerated depreciation already account for a very large share of corporate tax breaks and allows many companies to pay nothing at all.
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report May 15, 2020 Major Cash Payment and Tax Provisions in the HEROES Act
The major provisions for cash payments and tax changes in the House Democrats’ Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act would provide nearly $600 billion to individuals and households and average benefits of more than $3,000 to families in all but the highest income levels.
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brief May 14, 2020 Analysis: How the HEROES Act Would Reach ITIN Filers
The HEROES Act, filed by the House Democrats this week, includes a new one-time payment of $1,200 per adult and child and extends the payment to ITIN filers and their families. The bill also includes a retroactive change to the CARES Act ensuring ITIN filers will also receive the initial payment under the CARES Act. ITEP estimates more than 4.3 million adults and 3.5 million children would benefit from this change.
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report May 8, 2020 Harris-Sanders-Markey Cash Payment Proposal Would Dwarf Checks Sent Under the CARES Act
Sens. Kamala Harris, Bernie Sanders and Edward Markey released a proposal to provide a monthly payment of $2,000 for each member of a household (including up to three dependents), with benefits phased out at income levels starting at $200,000 for married couples. The proposal is partly a response to concerns that one-time cash payments under the CARES Act, which amount to $1,200 ($2,400 for married couples) and $500 for each child under age 17, are not sufficient to help families make ends meet or boost the economy.
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report April 15, 2020 State Options to Shore up Revenues and Improve Tax Codes amid Pandemic
The COVID-19 pandemic is an extraordinarily challenging time, as we see harm and struggle affecting the vast majority of our families, businesses, public services, and economic sectors. No one will be unaffected by the crisis, and everyone has a stake in the recovery and faces tough decisions. In the world of state fiscal policy, where revenue shortfalls are likely to be far bigger than can be filled by the initial $150 billion in federal aid or absorbed through funding cuts without causing major harm, tax increases must be among those decisions. Even with more federal support, states will need home-grown revenue solutions in the short, medium, and long terms as the crisis and its fiscal fallout intensify, subside, and eventually give way to a new normal. States must balance their budgets, and research shows that they harm their economies when they choose deep funding cuts to vital public investments over increasing tax contributions from those who can afford them.
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report March 25, 2020 Tax Rebates in the Federal CARES Act
Data available for download Congress passed and the president signed a $2 trillion plan that includes $150 billion in fiscal aid to states, $150 billion in health care spending, large… -
report March 13, 2020 Trump’s Proposed Payroll Tax Elimination
President Trump has proposed to eliminate payroll taxes that fund Social Security and Medicare through the end of the year. ITEP estimates that this would cost $843 billion and 65 percent of the benefits would go to the richest 20 percent of taxpayers, as illustrated in the table below.
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March 11, 2020 ITEP Testimony on the Illinois Earned Income Credit
Read as PDF Testimony of Lisa Christensen Gee, Director of Special Initiatives, Institute on Taxation and Economic Policy Submitted to: Illinois House Revenue Committee Chairman Zalewski, committee members—thank you for… -
March 4, 2020 ITEP Testimony Regarding Connecticut Senate Bill 16, An Act Concerning the Adult Use of Cannabis
This testimony explains the advantages of the cannabis tax structure proposed in Connecticut’s Senate Bill 16 and offers additional background information as well as ideas for potential changes to the bill.
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report February 18, 2020 Expanding State EITCs: Age Enhancements and a Credit Increase for Workers without Children in the Home
For 45 years, the federal Earned Income Tax Credit (EITC) has benefited low- and moderate-income workers. Yet, throughout its history, the EITC has provided little or no benefit to workers without children in the home—a group that includes noncustodial parents whose children live the majority of the year with another parent.
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February 12, 2020 ITEP Testimony In Support of H.B. 222 Income Tax Rates – Capital Gains Income & H.B. 256 Maryland Estate Tax – Unified Credit
Read as PDF Testimony of Kamolika Das, State Policy Analyst, Institute on Taxation and Economic Policy Submitted to: Ways and Means Committee, Maryland General Assembly Thank you for this opportunity… -
report February 5, 2020 State Itemized Deductions: Surveying the Landscape, Exploring Reforms
State itemized deductions are generally patterned after federal law, though nearly every state makes significant changes to the menu of deductions available or the extent to which those deductions are allowed. This report summarizes the key details of each state’s itemized deduction policies and discusses various options for reforming those deductions with a focus on lessening their regressive impact and reducing their cost to state budgets.
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January 29, 2020 ITEP Comments and Recommendations on REG-107431-19
Comments regarding the possibility that owners of passthrough businesses may be able to circumvent the $10,000 SALT deduction cap of section 164(b)(6) by recharacterizing the nondeductible portion of their state and local income tax payments as deductible expenses associated with carrying on a trade or business.
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report December 19, 2019 Mayor Pete Buttigieg’s Proposed EITC Expansion
Mayor Pete Buttigieg’s proposal An Economic Agenda for American Families: Empowering Working and Middle Class Americans to Thrive would expand the Earned Income Tax Credit (EITC) as modeled by the Working Families Tax Relief Act.
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report December 16, 2019 Corporate Tax Avoidance in the First Year of the Trump Tax Law
Profitable Fortune 500 companies avoided $73.9 billion in taxes under the first year of the Trump-GOP tax law. The study includes financial filings by 379 Fortune 500 companies that were profitable in 2018; it excludes companies that reported a loss.
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brief December 12, 2019 Opportunity Zones Bolster Investors’ Bottom Lines Rather than Economic or Racial Equity
This policy brief provides an overview of how opportunity zones are designed and highlights some of the flaws of the policy, including the detrimental impact opportunity zones have on communities of color.
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report December 12, 2019 States Should Decouple from Costly Federal Opportunity Zones and Reject Look-Alike Programs
Post enactment of TCJA, lawmakers in most states needed to decide how to respond to the creation of this new program. Given the shortcomings of the federal Opportunity Zones program and its added potential costs to states, the most prudent course of action is three-pronged: States should move quickly to decouple; states should reject look-alike programs; and lawmakers should make investments directly into economically distressed areas.
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report December 9, 2019 Cannabis Legalization: Tax Cut or Tax Hike?
Understanding the full tax consequences of cannabis legalization requires evaluating not only the excise taxes proposed in most legalization bills, but also the effects on the federal income tax liability of cannabis businesses.