The Tax Policy Blog

January 21, 2015

Last night during the State of the Union address, the president spoke briefly about taxes:

“Let’s close the loopholes that lead to inequality by allowing the top one percent to avoid paying taxes on their accumulated wealth. We can use that money to help more families pay for childcare and send their kids to college. We need a tax code that truly...

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January 21, 2015

The centerpiece of President Obama’s plan to increase taxes on the wealthy to fund tax credits for the middle-class is increasing the top tax rate on capital gains and dividends for high-income taxpayers.

Currently, the top capital gains and dividend tax rate for couples earning over $450,000 and singles with incomes above $400,000 is 20 percent. In addition, the Affordable Care Act subjects this investment income to an additional 3.8 percent Medicare Hospital Insurance Tax. This...

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January 20, 2015

In his State of the Union speech tonight, President Obama is said to propose $320 billion in new taxes on high-income Americans to finance tax cuts for the middle-class and free community college tuition for students. The White House says that this redistribution is an equitable way of stemming the rise of inequality in America while helping the middle-class whose incomes have stagnated in recent years.

While it is commonly acknowledged that Obama’s plan has little hope of being...

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January 16, 2015

Representative Chris Van Hollen (D-MD) has proposed a series of taxes, credits, and subsidies to redistribute the tax burden and income from the top one percent of income earners to middle-income workers, two-earner households, and savers. The plan would raise tax rates on capital formation, and would lower taxes on wages (although not generally at the margin). The net economic effects would be negative for the GDP, and could reduce pre-tax wages and job opportunities, offsetting some of...

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January 16, 2015

“Buck up,” Gov. Jay Inslee (D) said in introducing a budget calling for $1.4 billion in higher taxes over the coming biennium, including a new capital gains tax that is merely the latest in a string of efforts to introduce some sort of income tax in the state.

Inslee isn’t the first elected official to tell Washingtonians to get with the (higher tax) program. The state has twice adopted personal income taxes twice, and corporate income taxes...

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January 16, 2015

This post is also available as a column on Forbes here.

The 2015 legislative session started this week in most states and taxes are already proving to be a hot issue. Maine Governor Paul LePage made a splash in headlines last Friday with a well-thought out plan to lower individual and corporate income tax rates, a Nebraska think tank has a...

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January 16, 2015

The Internal Revenue Service has announced that they are overworked and underfunded so they are taking the "Service" out of the IRS.

In her recent report to Congress, National Taxpayer Advocate Nina E. Olson warns that “taxpayers this year are likely to receive the worst levels of taxpayer service since at least 2001 when the IRS implemented its current performance measures.”

The report points to a “combination of the IRS’s increasing workload, the erosion of public trust...

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January 16, 2015

On May 5, Michigan voters will go to the polls to consider a constitutional amendment raising the state sales tax from 6 to 7 percent and trigger the enactment of a broader tax and spending modification package designed to raise an additional $1.7 billion a year for transportation, education, and low-income supports.

While most...

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January 15, 2015

Marginal tax rates are usually thought of as being about income – or perhaps about a specific type of income, like wages. And the structure of them is usually thought of as “if I earn a dollar more, my tax liability will increase.” Naturally, this concept means that taxes have some effect on peoples’ economic decisions.

This idea is a useful one in tax policy, but it can become an even more useful one once you start to relax the definitions a little bit. The basic structure of the...

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January 15, 2015

Last year, New York State made some exciting changes to its corporate income tax code (we outline them all here). Among them were the elimination of two tax bases, a rate reduction from 7.1 percent to 6.5 percent, merging of the duplicative bank tax into the general corporate tax, and restructuring of Net...

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January 15, 2015

Corporations have received a lot of scrutiny for their tax planning strategies, but what about shareholders? An article in yesterday’s Wall Street Journal sheds light on some of the planning techniques that are used to avoid high dividend taxes:

...

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January 15, 2015

This week, Representative Chris Van Hollen (D-MD) introduced a series of tax proposals aimed at redistributing income by cutting taxes for middle-and lower-income taxpayers and raising them on businesses and high-income taxpayers (Read more about it here). One of the revenue raisers/mechanisms by which this plan would increase after-tax income of low- to middle-income taxpayers is to...

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January 14, 2015

One particularly salient feature of the Representative Chris Van Hollen’s new tax plan – a feature that is, frankly, not so good – is the 0.1% financial transaction tax.

Simply put, financial transactions are a very poor tax base. For one thing, it results in “pyramiding:” taxing the same economic activity many times. For another, economists generally think of trades as highly-...

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January 14, 2015

One quarter of the European Parliament voted to form a committee of inquiry on tax evasion today. The 188 MEPs met the threshold needed for the Parliament’s president, Martin Schulz, to start the committee.

Committees of inquiry are meant to investigate breaches or poor application of law in the EU. This committee will be tasked with investigating the tax agreements between Luxembourg and multinational corporations (...

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January 13, 2015

This week, Representative Chris Van Hollen (D-MD) spoke at a Center for American Progress event. At this event he outlined a new tax plan that he says will boost the after-tax income of low- and middle-income taxpayers and raise taxes on high-income taxpayers.

“Today, I am proposing policies that will raise wages, increase personal savings, and grow the economy. These policies are on top of the tax relief and tax fairness...

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