State policy toward cannabis is evolving rapidly. While much of the debate around legalization has rightly focused on potential health and criminal justice impacts, legalization also has revenue implications for state and local governments that choose to regulate and tax cannabis sales. This report describes the various options for structuring state and local taxes on cannabis and identifies approaches currently in use. It also undertakes an in-depth exploration of state cannabis tax revenue performance and offers a glimpse into what may lie ahead for these taxes.
Reports
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report January 23, 2019 Taxing Cannabis
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report January 17, 2019 A Simple Fix for a $17 Billion Loophole: How States Can Reclaim Revenue Lost to Tax Havens
Enacting Worldwide Combined Reporting or Complete Reporting in all states, this report calculates, would increase state tax revenue by $17.04 billion dollars. Of that total, $2.85 billion would be raised through domestic Combined Reporting improvements, and $14.19 billion would be raised by addressing offshore tax dodging (see Table 1). Enacting Combined Reporting and including known tax havens would result in $7.75 billion in annual tax revenue, $4.9 billion from income booked offshore.
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report January 9, 2019 Moving Toward More Equitable State Tax Systems
New and returning policymakers have a tremendous opportunity to improve their constituents’ lives and their states’ economies through tax policy. This report distills the findings of “Who Pays?” into policy recommendations that can serve as a guide to new lawmakers, advocates, and others seeking to improve their state’s tax codes. It explains the importance of favoring taxes on income and wealth over taxes on consumption, the value of certain targeted tax benefits for families living in poverty, the need to abandon ineffective, unnecessary tax subsidies for high-income households, and the promise of bold new options for improving the regressive distributional outcomes of state and local tax policies.
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report December 6, 2018 The Federal Estate Tax: An Important Progressive Revenue Source
For years, wealth and income inequality have been widening at a troubling pace. One 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. Lawmakers have exacerbated this trend by dramatically cutting federal taxes on inherited wealth, most recently by doubling the estate tax exemption as part of the 2017 Tax Cuts and Jobs Act. Further, lawmakers have done little to stop aggressive accounting schemes designed to avoid the estate tax altogether. This report explains how the percentage of estates subject to the federal estate tax has dropped dramatically from 2.16 percent in 2000 to just 0.06 percent in 2018, a 34-fold decrease in 19 years.
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report November 19, 2018 The Failure of Expensing and Other Depreciation Tax Breaks
Congress permitted full expensing only for five years, which will encourage businesses to speed up investments they would have made later. Republicans in Congress have discussed making the expensing provision permanent. This report argues that Congress should move in the other direction and repeal not just the full expensing provision but even some of the permanent accelerated depreciation breaks in the tax code, for several reasons.
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report November 14, 2018 A Fair Way to Limit Tax Deductions
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.
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report October 17, 2018 Low Tax for Whom? Indiana is a “Low Tax State” Overall, But Not for Families Living in Poverty
Indiana’s tax system has vastly different impacts on taxpayers at different income levels. For instance, the lowest-income 20 percent of Hoosiers contribute 12.8 percent of their income in state and local taxes — considerably more than any other income group in the state. For low-income families, Indiana is far from being a low tax state; in fact, it is the eighth highest-tax state in the country for low-income families.
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report October 17, 2018 Low Tax for Whom? Oklahoma is a “Low Tax State” Overall, But Not for Families Living in Poverty
Oklahoma’s tax system has vastly different impacts on taxpayers at different income levels. For instance, the lowest-income 20 percent of Oklahomans contribute 13.2 percent of their income in state and local taxes — considerably more than any other income group in the state. For low-income families, Oklahoma is far from being a low tax state; in fact, it is the fifth highest-tax state in the country for low-income families.
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report October 17, 2018 Low Tax for Whom? Florida is a “Low Tax State” Overall, But Not for Families Living in Poverty
Florida’s tax system has vastly different impacts on taxpayers at different income levels. For instance, the lowest-income 20 percent of Floridians contribute 12.7 percent of their income in state and local taxes — considerably more than any other income group in the state. For low-income families, Florida is far from being a low tax state; in fact, it is the ninth highest-tax state in the country for low-income families.
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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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report September 17, 2018 State Tax Codes as Poverty Fighting Tools: 2018 Update on Four Key Policies in All 50 States
This report presents a comprehensive overview of anti-poverty tax policies, surveys tax policy decisions made in the states in 2018, and offers recommendations that every state should consider to help families rise out of poverty. States can jumpstart their anti-poverty efforts by enacting one or more of four proven and effective tax strategies to reduce the share of taxes paid by low- and moderate-income families: state Earned Income Tax Credits, property tax circuit breakers, targeted low-income credits, and child-related tax credits.
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report August 23, 2018 ITEP Testimony “Regarding the Final Report of the Arkansas Tax Reform and Relief Legislative Task Force”
Read the testimony in PDF WRITTEN TESTIMONY SUBMITTED TO: THE ARKANSAS TAX REFORM AND RELIEF TASK FORCE Lisa Christensen Gree, Senior State Tax Policy Analyst Institute on Taxation and Economic Policy… -
report July 24, 2018 Rep. Shuster’s Mixed Bag: Doubling the Gas Tax before Repealing It Entirely
This article examines the good aspects of Rep. Shuster’s infrastructure funding plan (a higher gas tax that is indexed to inflation), the bad (a flawed indexing formula and eventual gas tax repeal), and the downright ugly (tying the hands of a funding commission before their work even begins and refusing to ask more of high-income households).
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report July 17, 2018 Understanding and Fixing the New International Corporate Tax System
The Tax Cuts and Jobs Act (TCJA) radically changed the international tax system. It slashed taxes on corporate income, both domestic and foreign. It encouraged U.S. multinational corporations to shift jobs, profits, and tangible property abroad, and keep intangibles home. This report describes the new international tax system—and its many gaps—and also provides a road map for how to fix these gaps and surveys recent legislative approaches.
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report July 11, 2018 Federal Tax Cuts in the Bush, Obama, and Trump Years
Since 2000, tax cuts have reduced federal revenue by trillions of dollars and disproportionately benefited well-off households. From 2001 through 2018, significant federal tax changes have reduced revenue by $5.1 trillion, with nearly two-thirds of that flowing to the richest fifth of Americans.
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report June 27, 2018 The Other SALT Cap Workaround: Accountants Steer Clients Toward Private K-12 Voucher Tax Credits
On May 23, 2018, the IRS and Treasury Department announced that they “intend to propose regulations addressing the federal income tax treatment of certain payments made by taxpayers for which… -
report June 6, 2018 The New International Corporate Tax Rules: Problems and Solutions
The nation’s corporate tax system has been dysfunctional for decades. Unfortunately, the recently enacted Tax Cuts and Jobs Act (TCJA) fails to solve fundamental problems facing the corporate tax and, in some ways, makes these problems even worse.
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report May 23, 2018 SALT/Charitable Workaround Credits Require a Broad Fix, Not a Narrow One
The federal Tax Cuts and Jobs Act (TCJA) enacted last year temporarily capped deductions for state and local tax (SALT) payments at $10,000 per year. The cap, which expires at the end of 2025, disproportionately impacts taxpayers in higher-income states and in states and localities more reliant on income or property taxes, as opposed to sales taxes. Increasingly, lawmakers in those states who feel their residents were unfairly targeted by the federal law are debating and enacting tax credits that can help some of their residents circumvent this cap.
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report April 30, 2018 State & Local Tax Contributions of Young Undocumented Immigrants
This report specifically examines the state and local tax contributions of undocumented immigrants who are currently enrolled or immediately eligible for DACA and the fiscal implications of various policy changes. The report includes information on the national impact (Chart 1) and provides a state-by-state breakdown (Appendices 1 and 2).
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report April 13, 2018 10 Things You Should Know about the Nation’s Tax System
Everyone pays taxes, including those who earn the least. Our collective federal, state, and local tax system includes income taxes, payroll taxes (Social Security, Medicare), property taxes, sales and other excise taxes. The total share of taxes (federal, state, and local) that Americans across the economic spectrum will pay in 2018 is roughly equal to their total share of income.
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report April 12, 2018 Many Large Corporations Reporting Tax Cut-Inspired Employee Bonuses Were Paying Low Tax Rates to Begin With
Since the corporate tax cut took effect at the beginning of 2018, a number of large corporations have announced plans to give bonuses or pay raises to some of their employees. Some of these companies have explicitly said that the new tax law, which sharply reduced the federal corporate income tax rate from 35 to 21 percent, made these moves possible. But an examination of the tax-paying habits of these corporations found that many of them used various tax breaks and accounting maneuvers to reduce their tax rates to below 21 percent year after year before the new tax law passed.
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report April 11, 2018 Trump Tax Cuts Likely Make U.S. Corporate Tax Level Lowest Among Developed Countries
U.S. corporate tax collection was equal to 2.2 percent of the nation’s gross domestic product (GDP) in 2016, significantly less than the average 2.9 percent collected by the other 34 other OECD countries for which data were available.
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report April 11, 2018 The U.S. Is One of the Least Taxed Developed Countries
The most recent data from the Organization for Economic Cooperation and Development (OECD) show that the United States is one of the least taxed of the developed nations.
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report April 11, 2018 Fifteen (of Many) Reasons We Need Real Corporate Tax Reform
This ITEP report examines a diverse group of 15 corporations’ federal income tax disclosures for tax year 2017, the last year before the recently enacted tax law took effect, to shed light on the widespread nature of corporate tax avoidance. As a group, these companies paid no federal income tax on $24 billion in profits in 2017, and they paid almost no federal income tax on $120 billion in profits over the past five years. All but one received federal tax rebates in 2017, and almost all paid exceedingly low rates over five years.