As we near this year’s “lame duck” session of Congress, there has been renewed interest in reforming the child tax credit as part of a tax deal. Our new analysis highlights the trade-offs that policymakers will face
Garrett Watson is Senior Policy Analyst and Modeling Manager at the Tax Foundation, where he conducts research on federal and state tax policy. His work has been featured in The Washington Post, The Atlantic, Politico, the Associated Press and other major outlets.
Previously, Garrett was a program manager at a nearby think tank and conducted policy research on economic opportunity and labor markets, including non-compete clause reform.
Garrett earned a bachelor’s degree from St. Lawrence University in upstate New York, where he studied economics and philosophy. Garrett lives in northwest Arkansas and is an avid hockey fan and snowboarder.
The business tax changes originally introduced in the TCJA are scheduled to increase tax burdens on businesses at a time when economic headwinds and broader uncertainty are higher than they have been in decades.
We find that the dynamic cost of permanent bonus depreciation rises by about 7 percent under 4 percent inflation, but the economic benefit, measured by the size of the economy, rises by about 25 percent.
The Social Security Administration (SSA) announced the cost-of-living adjustment for Social Security payments based on inflation over the previous year. This has brought renewed attention to how the tax code treats Social Security benefits, which can be a confusing subject for taxpayers.
President Biden proposed a 7-point hike in the corporate tax rate to 28 percent, a new minimum book tax on corporate profits, and higher taxes on international activity. We estimated these proposals would reduce the size of the economy (GDP) by 1.6 percent over the long run and eliminate 542,000 jobs.
When examining tax burdens on businesses, it is important to consider both federal and state corporate taxes. Corporate taxes are one of the most economically damaging ways to raise revenue and are a promising area of reform for states to increase competitiveness and promote economic growth, benefiting both companies and workers.
The phaseout of 100 percent bonus depreciation, scheduled to take place after the end of 2022, will increase the after-tax cost of investment in the U.S. Permanently extending it would increase long-run economic output by 0.4 percent and increase employment by 73,000 FTE jobs.
In dollar terms, the industries that would account for the largest book minimum tax liabilities are manufacturing, at $73.2 billion, followed by finance, insurance, and management at $46.9 billion.
How will the Inflation Reduction Act taxes impact inflation, economic growth, tax revenue, and everyday taxpayers? See Inflation Reduction Act tax changes.
While exempting accelerated depreciation from the book minimum tax would reduce some of the economic harm of the tax, there remain many unresolved problems within the design and structure of the tax that make it a poorly chosen revenue option.
The proposals share a common goal of improving incentives for households to save during a time when inflation is impacting their finances.
The Biden administration has been supportive of the negotiations, but the changes should be reviewed in the context of recent policy changes in the U.S. and elsewhere, the general landscape of business taxation in the U.S., and potential challenges and risks arising from the global tax deal.
President Biden’s budget proposes several new tax increases on high-income individuals and businesses, which combined with the Build Back Better plan would give the U.S. the highest top tax rates on individual and corporate income in the developed world.
The CBO projections show policymakers’ top priority over the next five years will need to be cleaning up our country’s fiscal situation while maintaining a pro-growth and competitive tax code.
Starting this year, firms must amortize their research and development (R&D) expenses over five years rather than immediately deduct them from taxable income, a policy change designed to raise federal tax revenue in the short term.
As the deadline for tax filing nears, the IRS faces scrutiny for its backlog of returns, inaccessible taxpayer service, and delays in issuing certain refunds.
As part of President Biden’s proposed budget for fiscal year 2023, the White House has once again endorsed a major tax increase on accumulated wealth, adding up to a 61 percent tax on wealth of high-earning taxpayers.
Biden’s proposal would impose a complicated never been tried before tax, adding new compliance and administrative challenges for an already overburdened IRS while weakening the U.S. economy by raising the tax burden on U.S. saving and entrepreneurship.
In his State of the Union Address, President Biden called for leveling the global research & development (R&D) playing field by increasing federal R&D spending, specifically by asking Congress to pass the bipartisan United States Innovation and Competition Act (USICA).
By reducing the tax code’s current barriers to investment and saving and simplifying its complex rules, lawmakers would greatly enhance the ability of Americans to pursue new ideas, create more opportunities, and build financial security for themselves and their families.