The Tax Policy Blog

May 22, 2014

U.S. headquartered corporations pay an effective tax rate of 27.2 percent on income earned in foreign countries. Not surprisingly, this rate varies widely by industry.

The petroleum and coal industry faces the highest effective tax rate on foreign earned income at 36.1 percent, with a reported $42.7 billion in taxes paid on $118.2 billion in taxable income. The mining industry has the second highest effective tax rate at 35.3 percent.

The industry with the lowest effective tax...

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May 21, 2014

In response to Pfizer and many other U.S. companies openly planning to leave the U.S. for tax reasons, yesterday Senator Levin introduced the Stop Corporate Inversions Act of 2014. Corporate inversions are where a U.S. company buys a smaller foreign company and takes its headquarters...

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May 21, 2014

One of the most counterintuitive ideas in tax economics is the theoretical result that taxes on imports are equivalent to taxes on exports over the long run, and vice versa. They both can have the same effect of reducing international trade in general, but neither theoretically nor empirically can the two be separated. The American Enterprise Institute...

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May 21, 2014

The IRS issued a new ruling on the asset class for the depreciation of biofuel equipment, that is, equipment used in the creation of ethanol. The ruling places ethanol fuel equipment into class 49.5 which grants it a recovery period of seven years for equipment, and shifts to ten years under certain conditions, predominately foreign use (see section 168(g) for additional...

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May 21, 2014

This week, legislation in the House and the Senate was introduced aimed at stopping tax-driven corporate inversions. This is in response to recent news that a few U.S. corporations have looked to purchase foreign corporations as a means of moving their operations offshore and avoiding the...

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May 21, 2014

Washington State’s $8.7 billion tax incentive for aerospace production (primarily Boeing and its affiliated suppliers) is in the news again, with the European Union indicating the tax incentive may come up in a new round of World Trade Organization disputes. The United States and the European Union have a long history of suits and countersuits regarding various programs for...

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May 20, 2014

The state of New Jersey is once again hearing calls for a “millionaire’s tax,” with State Senate President Stephen Sweeney (D) saying he is “dead serious” in wanting to impose a millionaire’s tax, and that tax hikes should be “on the table” in New Jersey’s ongoing budget debate. This isn’t the first time in recent years that New Jersey has seen debate on this...

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May 20, 2014

We have created an interactive map which tracks U.S. multinational corporations’ reported foreign taxable income, taxes paid, and average tax rate from 1992 to 2010 in over 90 countries using all available IRS data from Form 1118 .

Use the drop down options on the map to select country, year, and data category (i.e. foreign income, foreign taxes paid, and...

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May 19, 2014

Tax policy experts like to talk about broadening bases and lowering rates. In general, this conventional wisdom is great. If some economic activity is going untaxed, better to add that to the tax base so you can lower rates on everyone else.

However, properly broadening the base is harder than it looks! You can think of it almost like wrapping a present. You want to cover the entire surface area once, but you don’t want to double-cover spots. For example, you don’t want to assess...

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May 19, 2014

This week, the Water Resources Reform and Development Act of 2014 (WRRDA) is likely to be passed by the House and Senate, as a conference committee has come to an agreement on a compromise bill. When this bill was being debate last year, I noted that then-current proposals, like putting a new import tax on Canadian goods shipped through ports with lower fees, were not viable solutions, and identified them as “...

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May 16, 2014

The sluggish recovery in the U.S. continues to confound policy makers. People seem to want to hang their hopes on the Fed, but no amount of Fed action can overcome a tax code that severely punishes investment. Here are some things to know about economic growth, investment, and the impact of tax policy.

  1. The U.S. has one of the lowest levels of investment in the...
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May 16, 2014

This is day 5 of our week-long series discussing taxes and migration, and responding to the Center on Budget and Policy Priorities’ Michael Mazerov’s new paper on the topic. Read part 1 ...

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May 15, 2014

In the first quarter of this year, the economy grew at an annual rate of 0.1 percent. Over the last four years, the economy grew at an average of 2.25 percent. In all, this has been one of the slowest recoveries on record.

If we compare this recovery to the four years after the 1982 recession and the 1991 recession the comparison...

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May 15, 2014

Though taxes are the most common and recognizable source of state government revenues, it's important to remember that they're not the only source. In fact, state governments received 32.8 percent of their total general revenues from transfers from the federal government in the 2012 fiscal year.

That number varies for specific states, however. For example, Mississippi obtains 45.8 percent of its total state general revenues from federal transfers (the largest share in the country)....

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May 15, 2014

This week, Senator Elizabeth Warren (D-MA) reintroduced the Buffett Rule under the name the “Fair Share Tax.” This tax would be used to pay for a program that allows students to refinance their higher education loans at lower interest rates.

Generally, the “Fair Share Tax,” or Buffett Rule is a 30 percent minimum tax (income tax plus payroll tax minus charitable deductions) on individuals who make $1,000,000 or more. 

High Income Individuals Already Pay High Effective Tax...

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