Recent Work
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A Chart Book on the U.S. Tax System
House Tax Plan Will Keep 39.6% Top Rate, But That Won’t Matter for Most Types of Income Going to the Rich
November 1, 2017 • By Carl Davis
In recent days, news that House tax writers will not seek to cut the top personal income tax rate below 39.6 percent on taxable income above $1 million has led some to question whether the newest iteration of the Trump-GOP tax plan will provide a major windfall to the wealthy—a fact that has so far been widely understood. Unfortunately, this second-guessing is unnecessary.
State Rundown 11/1: Connecticut Balances Budget, Leaves Tax Code Out of Whack
November 1, 2017 • By ITEP Staff
This week a "historic" but highly problematic budget agreement was finally reached in Connecticut, Michigan lawmakers banned localities from taxing any food or beverages, and Nebraska and North Dakota both got unpleasant news about future revenues. Also see our "what we're reading" section for news on 11 states that have run up long-term fiscal deficits since 2002 and the impacts of flooding on local tax bases.
Trump Administration Might Propose a Long-Overdue Gas Tax Increase
October 31, 2017 • By Carl Davis
The Trump Administration is reportedly considering backing a 7-cent increase in the federal gas tax next year to pay for improvements in the nation's infrastructure. While most of the tax policy ideas coming from the administration in recent weeks would undermine the nation's ability to fund core public services, this one is a notable exception.
The Manufacturing Deduction Is a Case Study in Tax Policy Gone Wrong
October 30, 2017 • By Richard Phillips
When you think of manufacturing, what comes to mind? According to the U.S. Congress, manufacturing may include things like the production of wrestling-rated films, assembling bouquets of flowers and even slicing cheesecake. These unusual definitions of manufacturing come from the domestic production activities deduction (better known as the manufacturing deduction), a tax break Congress created to encourage manufacturing in the United States.
The Domestic Production Activities Deduction: Costly, Complex and Ineffective
October 26, 2017 • By Richard Phillips
When the Domestic Production Activities Deduction (DPAD) became law in 2004, proponents described it as a way to help American companies manufacture in the United States and export products abroad. In recent years, the DPAD has grown into one of the largest corporate tax expenditures, with an estimated cost of more than $15 billion in 2016 and $174 billion over the next 10 years.
Trickle-Down Dries Up: States without personal income taxes lag behind states with the highest top tax rates
October 26, 2017 • By Carl Davis, Nick Buffie
Lawmakers who support reducing or eliminating state personal income taxes typically claim that doing so will spur economic growth. Often, this claim is accompanied by the assertion that states without income taxes are booming, and that their success could be replicated by any state that abandons its income tax. To help evaluate these arguments, this study compares the economic performance of the nine states without broad-based personal income taxes to their mirror opposites—the nine states levying the highest top marginal personal income tax rates throughout the last decade.
State Rundown 10/25: Marijuana Taxes a Bright Spot amid Underperforming State Revenues
October 25, 2017 • By ITEP Staff
This week in state tax news saw Alaska begin yet another special session, Louisiana lawmakers holding meetings to begin preparing for the state’s looming (self-imposed) fiscal cliff, and Alabama policymakers beginning a study of school finance (in)adequacy and (in)equity. Meanwhile, state revenue performance is poor well into 2017 in many states, though Montana, Nevada, and Oregon are all enjoying modest but welcome revenue bumps from legalized marijuana.
As our report on the Trump-GOP tax framework explained, in nine states plus the District of Columbia, more than a fifth of households would pay higher taxes under the framework.
GOP Tax Plan Will Mainly Benefit Millionaires Even If Top Rate Remains 39.6 Percent
October 24, 2017 • By Steve Wamhoff
The Trump-GOP taxframework would reduce the top personal income tax rate from 39.6 percent to 35 percent, but now lawmakers are discussing keeping the top personal income tax rate at 39.6 percent for those with taxable income of more than $1 million. This modification would barely change the proposal’s overall impact.
The Jig Is Up: Republican Budget Resolution Finally Admits That Deficit Will Soar Under GOP Tax Plan
October 20, 2017 • By Alan Essig
For some lawmakers, annual deficits matter a lot—unless the nation is paying for tax cuts for the wealthy via deficit spending. Last night, Republican lawmakers demonstrated that previous grandstanding about the nation’s debt is much ado about nothing. The Senate approved a budget resolution on a party-line vote that would 1. fast-track legislation adding $1.5 trillion to the deficit over 10 years by cutting taxes, and 2. make it easy to enact this measure without a single Democratic vote.
Real tax reform would mean raising more revenue to make public investments and increasing the progressivity of the tax code. Many conservatives strongly disagree with this and insist that a substantial tax cut for the wealthiest Americans will grow the economy. Rather than engage in this policy debate based on policy ideals and principles, President Trump, other White House officials and GOP leaders have peppered their sales pitch for tax cuts with false claims about the amount of taxes that Americans pay and the effect the current GOP tax proposal would have on the tax system.
The Corporate Tax Code is in Dire Shape, But Trump-GOP Plan Would Make It Worse
October 18, 2017 • By Richard Phillips
Just how bad has the corporate tax code gotten? The newest edition of Offshore Shell Games, a joint report by the Institute on Taxation and Economic Policy (ITEP) and U.S. PIRG, outlines the massive scale of the offshore tax avoidance undertaken by U.S. multinationals. It’s well known that Fortune 500 companies have accumulated a stash of $2.6 trillion in earnings offshore, which has allowed them to avoid an estimated $752 billion in taxes.
State Rundown 10/18: Ballot Initiative Efforts Being Finalized
October 18, 2017 • By ITEP Staff
Ballot initiatives relating to taxes made news around the country this week, with Oregon voters to consider reversing new health care taxes, Washingtonians to vote on improving education funding, and Nebraskans to potentially vote on a state tax credit for school property taxes. Meanwhile, multiple states are finalizing their proposals to lure Amazon to build a new headquarters in their state, often through the use of massive tax subsidies. And in our "What We're Reading" section we have sobering news from Moody's Investors Service on states' struggles to fund their infrastructure and save for the next recession.
Tax Foundation Updates Its Problematic Wishlist for State Tax Policy
October 18, 2017 • By Carl Davis
This week the Tax Foundation published its 2018 State Business Tax Climate Index, or as University of Iowa economist Peter Fisher has nicknamed it, the “Waste of Time Index.”
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