Policy Briefs
Not Worth Its SALT: Tax Cut Proposal Overwhelmingly Benefits Wealthy, White Households
April 20, 2021 • By Carl Davis, ITEP Staff, Jessica Schieder
A previous ITEP analysis showed the lopsided distribution of SALT cap repeal by income level. The vast majority of families would not benefit financially from repeal and most of the tax cuts would flow to families with incomes above $200,000. This report builds on that work by using a mix of tax return and survey data within our microsimulation tax model to estimate the distribution of SALT cap repeal across race and ethnicity. It shows that repealing the SALT cap would be the latest in a long string of inequitable policies that have conspired to create the vast racial income…
How Long Has It Been Since Your State Raised Its Gas Tax?
March 5, 2021 • By Carl Davis
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.
ANALYSIS: Cash and Tax Provisions in Biden’s Economic Recovery Plan
January 15, 2021 • By Steve Wamhoff
The $1.9 trillion economic recovery plan, known as the American Rescue Plan, announced by President-elect Biden contains, among other provisions, expanded cash payments and changes to the Child Tax Credit (CTC) and the Earned Income Tax Credit (EITC).
State Taxation of Capital Gains: The Folly of Tax Cuts & Case for Proactive Reforms
September 25, 2020 • By Marco Guzman
The federal tax system and every state treat income from capital gains more favorably than income from work. Preferential capital gains tax treatment includes exclusions and seldom-discussed provisions like deferral and stepped-up basis, as well as more direct tax subsidies for profits realized from local investments and, in some instances, from investments around the world. This policy brief explains state capital gains taxation, examines the flaws in state capital gains tax breaks, and proposes reform options that will help make state tax systems more progressive and more equitable.
Boosting Incomes and Improving Tax Equity with State Earned Income Tax Credits in 2020
September 15, 2020 • By Aidan Davis
The Earned Income Tax Credit (EITC) is a policy designed to bolster the incomes of low-wage workers and offset some of the taxes they pay, providing the opportunity for families struggling to afford the high cost of living to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been amplified as many states have enacted and expanded their own credits.
Tax Justice is…
September 15, 2020 • By Amy Hanauer
Racial justice requires tax justice. Economic justice requires tax justice. Climate and health justice require, yes, tax justice.
Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
July 29, 2020 • By Dylan Grundman O'Neill
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.
New Analysis Compares HEROES Act and HEALS Act, Disaggregates Data by Race and Income
July 28, 2020 • By ITEP Staff, Jessica Schieder, Meg Wiehe, Steve Wamhoff
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…
Major Cash Payment and Tax Provisions in the HEROES Act
May 15, 2020 • By ITEP Staff, Meg Wiehe, Steve Wamhoff
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.
Analysis: How the HEROES Act Would Reach ITIN Filers
May 14, 2020 • By Meg Wiehe
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.
Harris-Sanders-Markey Cash Payment Proposal Would Dwarf Checks Sent Under the CARES Act
May 8, 2020 • By Steve Wamhoff
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.
Opportunity Zones Bolster Investors’ Bottom Lines Rather than Economic or Racial Equity
December 12, 2019 • By Lorena Roque
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.
Options for a Less Regressive Sales Tax in 2019
September 26, 2019 • By Aidan Davis
Sales taxes are one of the most important revenue sources for state and local governments; however, they are also among the most unfair taxes, falling more heavily on low- and middle-income households. Therefore, it is important that policymakers nationwide find ways to make sales taxes more equitable while preserving this important source of funding for public services. This policy brief discusses two approaches to a less regressive sales tax: broad-based exemptions and targeted sales tax credits.
Reducing the Cost of Child Care Through State Tax Codes in 2019
September 26, 2019 • By Aidan Davis
The high cost of quality child care is a budget constraint for many working families and particularly daunting for parents who are working but earning low wages. Most families with children need one or more incomes to make ends meet which means child care expenses are an increasingly unavoidable and unaffordable expense. This policy brief examines state tax policy tools that can be used to make child care more affordable: a dependent care tax credit modeled after the federal program and a deduction for child care expenses.
Property Tax Circuit Breakers in 2019
September 26, 2019 • By Aidan Davis
State lawmakers seeking to make residential property taxes more affordable have two broad options: across-the-board tax cuts for taxpayers at all income levels, such as a homestead exemption or a tax cap, and targeted tax breaks that are given only to particular groups of low- and middle-income taxpayers. This policy brief surveys the advantages and disadvantages of the circuit breaker approach to reducing property taxes.
Boosting Incomes and Improving Tax Equity with State Earned Income Tax Credits in 2019
September 26, 2019 • By Aidan Davis
The Earned Income Tax Credit (EITC) is a policy designed to bolster the incomes of low-wage workers and offset some of the taxes they pay, providing the opportunity for families struggling to afford the high cost of living to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been magnified as many states have enacted and later expanded their own credits.
Promoting Greater Economic Security Through A Chicago Earned Income Tax Credit: Analyses of Six Policy Design Options
September 12, 2019 • By Lisa Christensen Gee
A new report reveals that a city-level, Chicago Earned Income Tax Credit would boost the economic security of 546,000 to 1 million of the city’s working families. ITEP produced a cost and distributional analysis of six EITC policy designs, which outlines the average after-tax income boost for families at varying income levels. The most generous policy option would increase after-tax income for more than 1 million working families with an average benefit, depending on income, ranging from $898 to $1,426 per year.
Election 2020: Tax Policy Essentials
July 26, 2019 • By ITEP Staff
The nation’s tax policies and their role in economic inequality are front and center during this election cycle. For those interested in how the nation can move toward a fairer tax system and or more detailed information about progressive tax policy ideas, ITEP created this quick guide.
Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
July 17, 2019 • By Dylan Grundman O'Neill
Lawmakers in many states have enacted “sales tax holidays” (16 states will hold them in 2019), to provide a temporary break on paying the tax on purchases of clothing, school supplies, and other items. While these holidays may seem to lessen the regressive impacts of the sales tax, their benefits are minimal. This policy brief looks at sales tax holidays as a tax reduction device.
Most Americans Live in States with Variable-Rate Gas Taxes
June 27, 2019 • By Carl Davis
The flawed design of federal and state gasoline taxes has made it exceedingly difficult to raise adequate funds to maintain the nation’s transportation infrastructure. Twenty-eight 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 purchase 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 25 years. Many states have waited a decade or more since last raising their own gas tax rates.
Rewarding Work Through State Earned Income Tax Credits in 2018
September 17, 2018 • By ITEP Staff
The Earned Income Tax Credit (EITC) is a policy designed to bolster the earnings of low-wage workers and offset some of the taxes they pay, providing the opportunity for struggling families to step up and out of poverty toward meaningful economic security. The federal EITC has kept millions of Americans out of poverty since its enactment in the mid-1970s. Over the past several decades, the effectiveness of the EITC has been magnified as many states have enacted and later expanded their own credits. The effectiveness of the EITC as an anti-poverty policy can be increased by expanding the credit at…
Reducing the Cost of Child Care Through State Tax Codes in 2018
September 17, 2018 • By Aidan Davis
Families in poverty contribute over 30 percent of their income to child care compared to about 6 percent for families at or above 200 percent of poverty. Most families with children need one or more incomes to make ends meet which means child care expenses are an increasingly unavoidable and unaffordable expense. This policy brief examines state tax policy tools that can be used to make child care more affordable: a dependent care tax credit modeled after the federal program and a deduction for child care expenses.
Options for a Less Regressive Sales Tax in 2018
September 17, 2018 • By Aidan Davis
Sales taxes are one of the most important revenue sources for state and local governments; however, they are also among the most unfair taxes, falling more heavily on low- and middle-income households. Therefore, it is important that policymakers nationwide find ways to make sales taxes more equitable while preserving this important source of funding for public services. This policy brief discusses two approaches to a less regressive sales tax: broad-based exemptions and targeted sales tax credits.
Property Tax Circuit Breakers in 2018
September 17, 2018 • By Aidan Davis
State lawmakers seeking to make residential property taxes more affordable have two broad options: across-the-board tax cuts for taxpayers at all income levels, such as a homestead exemption or a tax cap, and targeted tax breaks that are given only to particular groups of low- and middle-income taxpayers. One such targeted program to reduce property taxes is called a “circuit breaker” because it protects taxpayers from a property tax “overload” just like an electric circuit breaker: when a property tax bill exceeds a certain percentage of a taxpayer’s income, the circuit breaker reduces property taxes in excess of this “overload”…
Sales Tax Holidays: An Ineffective Alternative to Real Sales Tax Reform
July 12, 2018 • By Dylan Grundman O'Neill
An updated version of this brief for 2019 is available here. Read this report in PDF. Overview Sales taxes are an important revenue source, composing close to half of all state tax revenues.[1] But sales taxes are also inherently regressive because the lower a family’s income, the more the family must spend on goods and […]
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