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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.

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.

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.

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.

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.

America’s tax system overall is marginally progressive. The share of all taxes paid by the richest Americans slightly exceeds their share of the nation’s income. Conversely, the share of all taxes paid by the poorest Americans is slightly smaller than the share of the nation’s income going to that group.

This analysis finds that extending the temporary tax provisions in 2026 would not be aimed at helping the middle-class any more than TCJA as enacted helps the middle-class in 2018.

Online retailer Amazon.com made headlines last year when it began collecting every state-level sales tax on its direct sales. Savvy observers quickly noted that this change did not affect the company’s large and growing “marketplace” business, where it conducts sales in partnership with third-parties and rarely collects tax. But far fewer have noticed that even on its direct sales, Amazon is still not collecting some local-level taxes.

Statement of Richard Phillips, Senior Policy Analyst
Institute on Taxation and Economic Policy
Before the Committee on Ways and Means Subcommittee on Tax Policy
Hearing on “Post Tax Reform Evaluation of Recently Expired Tax Provisions”

This policy brief explains the federal and various state-level breaks for 529 plans and explores the potential impact that the change in federal treatment of 529 plans will have on state revenues.