The Tax Policy Blog

February 02, 2015

Part of the President Obama’s fiscal year 2016 budget is a 14 percent tax on foreign corporate income currently reinvested overseas. This proposal would retroactively tax income being held offshore in order to fund more than $400 billion in new infrastructure spending.

Retroactive taxation, such as the president’s deemed repatriation proposal, is bad tax policy. It is unfair to taxpayers, brings instability to the tax code, and could hit some cash-strapped corporations hard....

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February 02, 2015

One thing I notice about the debates on both tax policy and income inequality is that a lot of people seem to have relatively hazy ideas about how income is earned in America, and how much of each kind of income there is. For example, if someone is earning $300,000 a year, where is their income likely to be coming from? How much revenue is drawn from capital gains taxes? And how is income distributed between corporate shareholders and workers? People don't tend to have very strong priors...

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January 30, 2015

The Washington Post yesterday posted an editorial opposing the repeal of the Affordable Care Act’s medical device tax, on the grounds that it would constitute “caving in to special interests.”

That view of the situation is deeply troubling in a number of ways, and I feel especially compelled to comment on it...

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January 30, 2015

This post originally appeared as a Forbes op-ed here.

Ohio tax policy needs a lot of work, and Governor John Kasich talks about it a lot. The state ranks 44th in the Tax Foundation’s State Business Tax Climate Index, the municipal income tax system is...

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January 29, 2015

This afternoon, Nevada Governor Brian Sandoval proposed restructuring the state's existing $200 annual Business License Fee into a quarterly graduated tax that is calculated based on a business's total revenue and industry. In the proposal, there are 30 possible industry classifications and 67 possible options for each (based on total revenue), amounting to 2,010 possible rates. 

Below are details provided by the Governor's Office:...

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January 29, 2015

As President Obama prepares to roll out another tax increase proposal targeting capital gains and dividends, it’s instructive to look at what happened the last time he did that. Fortunately, the IRS just released preliminary data on tax year 2013, the year the top tax rate on capital gains and dividends went from 15 percent to 23.8 percent. The fiscal cliff deal raised the top rate to 20 percent and the...

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January 28, 2015

The Obama Administration yesterday backed down from its plan to tax the earnings on 529 savings accounts, a kind of saving account for higher education under section 529 of the tax code. At Bloomberg, Richard Rubin and Mike Dorning report: "A White House official, speaking on condition of anonymity, said the issue had become a distraction from the president’s...

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January 27, 2015

For this week's tax map, we're continuing our series on pass-through businesses. For the first map of the series, check out our map from last week

Sole proprietorships, S corporations, limited liability companies (LLCs), and partnerships are also known as pass-through businesses. These entities are called pass-throughs, because the profits of these firms are passed...

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January 26, 2015

The Congressional Budget Office (CBO) has released its 2015 to 2025 Budget and Economic Outlook. In this yearly publication, the CBO examines current laws (taxes and spending) and projects the outlook for the federal government’s budget for the next 10 years.

One of the topline projections the CBO makes is the budget deficit. This measures the difference between federal government spending and federal tax revenues (a higher deficit...

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January 26, 2015

Cut the individual income tax and raise the gas tax—that was South Carolina Governor Nikki Haley’s message in her 2015 State of the State address.

Though there aren’t a lot of details yet, it’s no surprise that South Carolina’s income tax rate is a competitive disadvantage for the state. South Carolina’s top rate of 7 percent is 12th highest in the nation, but also the highest among its...

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January 23, 2015

As part of his new tax plan, the president has proposed ending the “step-up” in tax basis for inherited assets, and, furthermore, requiring the capital gains tax to be paid at death rather than when an heir later sells the assets. There would be an exception for surviving spouses, with no tax due until the death of the second spouse, and an exemption for the first $200,000 of gains for a couple.

...

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January 23, 2015

It looks like I wasn’t the only one unhappy with the president’s economic proposals in the State of the Union. In a New York Times op-ed this week, Glenn Hubbard, too, voiced his disappointment:

“Our unwillingness to confront mounting inefficiencies in the nation’s tax code and growing...

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January 23, 2015

Last week, IRS Commissioner John Koskinen said at a news conference that the IRS may need to use furloughs in order to handle its budget issues. A well-functioning revenue service is necessary for an effective government, so it is worthwhile to consider the facts of the situation, and what they mean.

Congress indeed cut the IRS budget by $346 million...

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January 22, 2015

This week's tax map comes from a report we released this morning and takes a look at the amount of private sector employment that comes from pass-through businesses.

Sole proprietorships, S corporations, limited liability companies (LLCs), and partnerships are also known as pass-through businesses. These entities...

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January 22, 2015

The President’s latest proposal to raise taxes on capital gains and dividends, which follows two rounds of tax increases in Obamacare and the fiscal cliff deal, raises serious concerns about the impact on investment. That’s because corporations rely to a large extent on shareholders to finance investment. That’s in fact the essence of the corporate form!

And when...

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