The Tax Policy Blog

November 13, 2014

The global financial crisis dramatically harmed the U.S. economy, reducing overall output by $455 billion in real terms.

Typically after recessions, the economy quickly recovers. However, this recovery has not been quick. While the U.S. economy has been growing for the past couple of years, it has been slow—too slow to fully recover from the crisis.

In fact, the Congressional Budget Office (CBO) projects that the U.S. economy will permanently remain below the pre-recession...

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November 12, 2014

Since 2000, GDP growth in the U.S. has been persistently low, averaging about 2 percent. This is much lower than the economic growth we saw in the past.

Between 1970 and 2000, GDP growth averaged above 3 percent. In fact, in multiple years throughout 1970s, 1980s, and 1990s, the economy grew at rates above 4 percent.

The recent trend toward slower growth in the U.S. is troubling, but its a trend that better economic policy can reverse.

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November 11, 2014

Americans often look at businesses impersonally. We think of them as lifeless entities that earn profits and don’t do much else. When we think of businesses this way, it becomes very easy to think that business taxes are somehow different than other taxes.

But the reality is that businesses are simply groups of people; they are workers, consumers, and shareholders. This means that when we tax businesses, we actually tax people; workers through lower wages, consumers through higher...

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November 10, 2014

One of the biggest issues with today’s tax code is that a lot of economic activity is taxed more than once. The most obvious instance is with corporate income.

Corporate income is taxed at the entity level then again at the shareholder level. This is due to the fact that the tax system treats shareholders and the corporation as separate entities. Even if the United States lowered its corporate income tax rate to 25 percent, the combined tax on corporate income would be high.

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November 10, 2014

Some of the most heated debate over taxes focuses on a single feature of the tax code: the top marginal rate. Some people argue that the top marginal rate on income is an important feature in the incentives to work and invest. Others argue that the top bracket of the income tax is a key source of revenue for public priorities. Both arguments are fair.

In 2012, a deal was passed that increased the top marginal rate from 35% to 39.6%. In order to illustrate the effects of the top...

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November 10, 2014

Young adults in the United States are not saving. In fact, on the whole people under 35 are facing a saving deficit of close to 2 percent.

According to the Wall Street Journal and new data from Moody’s Analytics, the savings rate for those under 35 group has fallen from its post-...

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November 07, 2014

I find myself increasingly puzzled by the monthly ritual of wall-to-wall reporting on “jobs day.” The first Friday of every month, the Bureau of Labor Statistics releases a report on the employment situation in the country. While I appreciate the importance of the size of the labor market in general – in fact, much of my work on our Taxes and Growth project is about the labor supply – I think monthly updates can be a needless distraction from the big picture. This is especially because the...

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November 06, 2014

When businesses suffer losses in a calendar year, well-structured corporate tax codes allow them to deduct those losses against previous or future tax returns. These provisions are called net operating loss (NOL) carrybacks and carryforwards. While the federal code allows 20 years of NOL carryforwards and 2 years of NOL carrybacks, states vary widely on their net operating loss policies.

Net operating loss deductions are important because...

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November 06, 2014

The Medical Device Tax levied as part of the Affordable Care Act is likely to be re-examined as a result of Tuesday’s election. The tax is controversial, especially in Minnesota, where the medical device industry employs a lot of people. In a symbolic vote last year, 79 senators voted for a repeal of the tax in a budget...

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November 05, 2014

Like many of you, I was a little bit blown away by some of the election outcomes last night, particularly the unexpectedly close U.S. Senate race in Virginia (looks like Warner will win by a hair), and the Illinois, Maryland, and Massachusetts gubernatorial races (all those mansions flipped Republican). The Washington Post has a nice list of “firsts”...

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November 05, 2014

One of the most obvious questions from Tuesday’s election results is: what does this mean for tax reform?

I think it certainly enhances the prospects of Congress and the president reaching a grand bargain on overhauling the tax code, however the likelihood that it will be this Congress and this president making such a deal seem pretty remote.

Even before the election, the conventional wisdom in the...

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November 05, 2014

Each time you purchase your favorite coffee and pastry at the corner shop, you get a receipt that tells you exactly how that money was spent and the taxes paid. Since April, taxpayers can do the same with their federal income taxes, social security taxes, and Medicare taxes for 2013. The White House has a tool that allows users to input their exact tax burden and see just...

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November 05, 2014

Two days ago, we listed tax initiatives we were watching in the states. Here are the results, using the most up-to-date numbers available:

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Result

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November 05, 2014

One of the initiatives we were watching most yesterday was the vote on implementing a “margin tax” in Nevada, which was an attempt to raise revenue for public schools. Today, the news is that the initiative was voted down in a landslide, 78.8 to 21.2 percent with 95 percent of precincts reporting as of post time.

If you’ve been following our blog, you’ve seen the two posts my colleague Liz Malm...

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November 03, 2014

UPDATE: Results of state and local ballot initiatives have been posted here.

Tomorrow, voters in eighteen states will weigh in on state and local tax policy through ballot initiatives covering everything from taxpayer protection measures in North Dakota and Tennessee to a vote on a proposed margin tax...

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