More Recent Tax Foundation News: Page 1
Contestants have until next Wednesday, October 15, to submit their videos to the Tax Foundation's CompeteUSA YouTube Contest, a campaign to raise awareness of America's high business tax rates and how those taxes have an impact on our competitiveness, wages and living standards. The winner will earn $5,000 while second and third prize winners will receive $1,000 and $500, respectively.
Click here for the rules or here to learn more about CompeteUSA.
In the second of the three Presidential debates, held last night at Belmont University in Nashville, Senators Barack Obama and John McCain largely stuck to their campaign scripts, repeating many of the factually incorrect or highly misleading talking points on tax issues.
Sen. Obama tried to get viewers to believe in his version of history, claiming that since George W. Bush took office, "we have [had a] half-a-trillion-dollar deficit annually." He also said the McCain tax plan would "give the average Fortune 500 CEO an additional $700,000 in tax cuts."
"Obama's deficit figure is way off," says Gerald Prante, a senior economist at the Tax Foundation who has fact-checked the claims from the Presidential candidates. "The highest deficit over the last eight years was $438 billion, and the average over the last 4 years was $292 billion."
Sen. McCain mistakes included chastising past lawmakers by complaining about the national debt, saying that Washington has "to stop this spending spree" because "we've laid a $10 trillion debt on these young Americans," while also touting his plan to double the personal exemption for dependents from $3,500 to $7,000.
"If Sen. McCain is concerned with the national debt, his tax proposals do not show it," says Prante. "Sen. McCain's tax proposals would grow the national debt rapidly, by over $4 trillion in a decade, according to some estimates. He can't cut that much spending by just going after earmarks."
Read the rest of the analysis. Read a commentary on the first presidential debate or the vice-presidential debate.
Click here for more analysis of the presidential candidates' tax plans, and here to compare specific provisions of the tax plans of McCain, Obama, Bob Barr (Libertarian Party), Chuck Baldwin (Constitution Party), Cynthia McKinney (Green Party), and Ralph Nader (independent).
Marginal tax rates will rise to over 50 percent on some middle-income families if Sen. Obama's tax plan becomes law, and over 40 percent under Senator McCain's plan, according to a new report from the Tax Foundation.
The report is Tax Foundation Fiscal Fact No. 150, "How Do the Presidential Candidates' Tax Plans Affect Taxpayers' Marginal Tax Rates?" by Robert Carroll, Ph.D., vice president for economic policy at the foundation. Carroll illustrates his point with a family of four—two working adults with two children—and explains the economic importance of "marginal" tax rates and why they can differ dramatically from statutory tax rates.
"Senator Obama's new and expanded tax credits for low-income taxpayers will certainly cut taxes for low-income people," explains Carroll, "but the credits are mostly recaptured from middle-income taxpayers. During this phase-out range, marginal tax rates shoot up, causing economically damaging side effects. As a result, for example, a family of four in the $30,000-to-$43,000 range would discover that for every additional dollar they earn, they pay more than 50 cents in income tax."
Read the new Tax Foundation Fiscal Fact.
Click here for more analysis of the presidential candidates' tax plans, and here to compare specific provisions of the tax plans of McCain, Obama, Barr (Libertarian Party), Baldwin (Constitution Party), McKinney (Green Party), and Nader (independent).
Wyoming has the best, and New Jersey has the worst, tax systems when it comes to "business friendliness," according to the Tax Foundation's recently completed 2009 State Business Tax Climate Index, a ranking of the 50 state tax systems that provides a roadmap for state lawmakers concerned with keeping their states tax-competitive.
Keeping a state competitive in today's global marketplace can be difficult, but there is one factor lawmakers have direct control over: the quality of state tax systems. The Index measures how well a state's tax system encourages investment by maintaining a broad tax base and low rates.
"The modern market is characterized by mobile capital and labor. Therefore, companies will locate where they have the greatest competitive advantage," said Tax Foundation Staff Economist Josh Barro, the study's author. "States with the best tax systems will be the most competitive in attracting new businesses and most effective at generating economic and employment growth."
The Index, published yearly by the Tax Foundation since 2003, ranks states based on the taxes that matter most to businesses and business investment: corporate tax, individual income tax, sales tax, unemployment tax and property tax. The states are scored on these taxes, and the scores are weighted based on the relative importance or impact of the tax to a business.
Read the 2009 State Business Tax Climate Tax Index.
The property tax collections of state and local governments will probably not be harmed by a federal bailout of lenders, according to a newly released historical review by Tax Foundation tax counsel Joseph Henchman.
In Tax Foundation Fiscal Fact No. 149, "Would a Federal Bailout Affect Local Property Tax Collections?" Henchman examines the tax treatment of federal property. The bailout proposal would transfer many mortgage-backed securities to the federal government in some form, and many foreclosures would give the federal government ownership pending disposition. Because entities of the federal government are usually immune from state taxation, state and local officials might be worried about their revenue stream.
"State and local governments in 2008 will rely on an estimated $397 billion in property tax collections. As of August 2008, 1.2 million homes were in foreclosure, out of 45 million mortgages outstanding," Henchman explains. "If even a fraction of the assets underlying the estimated $12 trillion in mortgage loans falls into government title, and are immunized from state and local taxes, a revenue problem could arise for local governments."
Read the Tax Foundation Fiscal Fact. More on property taxes here.
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