Tax Reform Options and Challenges

  • blog December 17, 2018

    Five Things to Know on the One-Year Anniversary of the Tax Cuts and Jobs Act

    While it has only been a year since passage of the Tax Cuts and Jobs Act (TCJA), it’s clear the law largely is both a debacle and a boondoggle. Below are the five takeaways about the legacy and continuing effect of the TCJA.

    1. The Tax Cuts and Jobs Act will substantially increase income, wealth, and racial inequality.
    2. The Tax Cuts and Jobs Act will continue to substantially increase the deficit.
    3. The Tax Cuts and Jobs Act is not significantly boosting growth or jobs.
    4. The Tax Cuts and Jobs Act continues to be very unpopular.
    5. Despite the Tax Cuts and Jobs Act’s lack of popularity and ill effects, many Republican lawmakers are calling for even more tax cuts for the wealthy and corporations.

  • blog December 12, 2018

    End-of-Year Tax Measure Would Give Deficit-Financed Tax Cuts to Wealthy Families and Corporations

    Outgoing Ways and Means Chairman Rep. Kevin Brady (R-TX) today introduced legislation that includes $80 billion in tax cuts that are unpaid for and largely benefit the wealthy. The bill would, among its numerous provisions, expand retirement and education savings programs that offer very little value to low-income families, delay the Health Insurance Tax for an additional two years, and delay the Medical Device Tax for an additional five years.

  • 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.

  • 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.

  • 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.

  • 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.

  • 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.”

  • 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.

  • news 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.”

  • 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.

  • blog September 12, 2018

    We Crunched Some Numbers to Show What Tax Reform for Working People Really Looks Like

    Throughout President’s Trump’s presidential campaign and from his first day in office until now, his administration has favored and promoted policies that benefit the wealthy and corporations even as it claims to be the working people’s champion. If more recent economic data are a reflection of what we’ll see in the long-term due to the Trump Administration’s recent tax cuts, wealth will continue to accrue at the top while income remains stagnant or barely budges for low- and moderate-income families. Policy can make a difference: ITEP Staff shows how the Grow American Incomes Now (GAIN) Act would help millions of working families left behind by the Tax Cuts and Jobs Act.

  • blog August 10, 2018

    How Opportunity Zones Benefit Investors and Promote Displacement

    The idea behind the new tax break is to provide an incentive for wealthy individuals to invest in the economies of struggling communities. Despite alleged intentions, it appears opportunity zones are turning into yet another windfall for wealthy investors and may encourage displacement of people in low-income areas, working against the provision’s intended goal.

  • blog August 1, 2018

    The Preferential Tax Treatment of Capital Gains Income Should Be Curbed, Not Substantially Expanded

    For true believers in supply-side economics, however, one major flaw of the TCJA is that it did not further cut taxes for the wealthy by reducing capital gains tax rates. But now the Trump Administration is considering using executive action to remedy this by indexing capital gains to inflation for tax purposes.

  • 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.

  • blog July 11, 2018

    The Immediate Economic Impact of the Tax Cuts and Jobs Act Could be Even Less Than Expected

    Now, new research from the Federal Reserve Bank of San Francisco finds that the Tax Cuts and Jobs Act may not be so much of a stimulus after all. In other words, lawmakers have left themselves with few options should the country face an economic recession, and the country may not receive a substantive economic benefit in the short term.

  • 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.

  • blog June 6, 2018

    New Legislation Would Close Significant Offshore Loopholes in the Tax Cuts and Jobs Act

    One simple rule should drive the nation’s international tax policies: tax the offshore profits of American companies the same way their domestic profits are taxed. The latest legislation to approach that ideal is the Per-Country Minimum Act (H.R. 6015), from Rep. Peter DeFazio (D-OR). The DeFazio bill closes the loophole that allows corporations to use foreign tax credits to shelter profits in tax havens from U.S. taxes. No other bill addresses this.

  • blog May 21, 2018

    Debate Over New Jersey’s Millionaires and ITEP’s Data

    New Jersey’s new governor, Phil Murphy campaigned on a promise to raise state income taxes on millionaires, a proposal that is supported by 70 percent of the state and was, until recently, backed by New Jersey’s Senate President, Steve Sweeney. In recent months, Sweeney changed his position on the proposed millionaires tax and called for an increase in New Jersey’s corporate tax instead. The idea of hiking taxes on corporations is not a bad one, particularly since corporations received a windfall from the Tax Cuts and Jobs Act. But Sweeney’s new opposition to an income tax hike for the state’s richest residents seems to be based on an erroneous reading of ITEP’s data.

  • blog May 15, 2018

    There Is No Evidence That the New Tax Law Is Growing Our Economy or Creating Jobs

    The House Ways and Means Committee will hold a hearing on the Tax Cuts and Jobs Act (TCJA) Wednesday. Proponents of the law likely will use the occasion to tout its alleged economic benefits and argue that its temporary provisions should be made permanent. The title of the hearing is “Growing Our Economy and Creating Jobs,” but there is little evidence that the law does either of these things.

  • blog May 10, 2018

    No Work Requirements for the Richest 1 Percent — Most of Their Tax Cuts Are for Unearned Income

    The Trump Administration is pushing to add or strengthen work requirements for programs that benefit low- and middle-income people but holds a different view when it comes to the wealthy. Most tax cuts enjoyed by the richest 1 percent of households under the recently enacted Tax Cuts and Job Act (TCJA) are tax cuts for unearned income.

  • blog May 2, 2018

    New UK Law May Shut Down the Biggest Tax Havens — Aside from the U.S.

    The United Kingdom’s parliament has enacted a new law requiring its overseas territories — which include notorious tax havens like Bermuda, the Cayman Islands, and the British Virgin Islands — to start disclosing by 2020 the owners of corporations they register. This could shut down a huge amount of offshore tax evasion and other financial crimes because individuals from anywhere in the world, including the United States. have long been able to set up secret corporations in these tax havens to stash their money.

  • blog April 27, 2018

    Trump Administration’s Spending Priorities Echo Tax Cut Priorities: Punish the Poor and Lavish the Rich

    In 2017, the Trump Administration released a budget proposal filled with loaded language about “welfare reform” and moving able-bodied people from welfare to work. This narrative is designed to perpetuate the pernicious idea that poor people have personal shortcomings and are taking something that rightly belongs to others.

  • blog April 19, 2018

    Congressional Budget Office: New Tax Law Helps Foreign Investors Even More than You Thought

    President Trump and his allies in Congress have made many wild claims about economic growth that would result from the Tax Cuts and Jobs Act. And the Congressional Budget Office just released a report revealing the TCJA will, in fact, create economic growth — for foreign investors.

  • 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.

  • blog April 10, 2018

    New ITEP Report: Extension of the Temporary TCJA Provisions Would Be Just as Regressive as TCJA Itself

    A new ITEP report estimates the impacts in every state of the much-discussed idea of extending the temporary provisions in the Tax Cuts and Jobs Act, which will expire after 2025 without further action from Congress. The report concludes that extending or making permanent these provisions would be just as skewed to the wealthy as the original law.