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Tax Proposals by the Biden Administration

The Biden administration has announced a number of tax proposals to fund new government investments such as infrastructure, education and family programs as part of the Build Back Better agenda.

From analyzing the American Jobs Plan and the American Families Plan to the U.S. Treasury’s international tax proposals, Tax Foundation experts continue to serve as trusted thought leaders, providing research, modeling, analysis, and commentary on how these new policies will impact U.S. competitiveness, economic growth, tax revenue, and everyday taxpayers. The posts below include our research and analysis on a variety of recently announced tax proposals. 

New webinars: Understanding Biden’s and Democrats’ Tax Plans: 1. Individual & Pass-through Business Taxes and 2. Corporate Taxes

Proposal for Reporting Requirements for Financial Institutions Misses the Mark

October 20, 2021

Reducing the tax gap is a good idea, but the reporting requirements for financial institutions could be better-targeted at the problem at hand.

What’s Going on with the Child Tax Credit Debate?

October 19, 2021

President Biden expanded and fundamentally changed the Child Tax Credit (CTC) for one year in the American Rescue Plan (ARP) passed in March 2021. Policymakers are now deciding the future of the expansion as part of the proposed reconciliation package, but a wide range of estimates for the effects of a permanent expansion is confusing the debate.

Wrong Tax Base Leads to Multiple Issues for Federal Nicotine Tax Proposal

October 18, 2021

The tobacco and nicotine tax proposal in the Build Back Better Act neglects sound excise tax policy design and focuses solely on revenue generation.

Higher Taxes Under House Ways and Means Plan Emphasize Need for Corporate Integration

October 13, 2021

Under the House Ways and Means plan to raise taxes on corporations and individuals, the integrated tax rate on corporate income would rise to the third highest in the OECD. To reduce this burden, policymakers could explore integrating the individual and corporate tax systems.

Corporate Tax Revenue Hit an All-Time High in 2021

October 12, 2021

This year’s robust corporate tax collections calls into question efforts by the administration and congressional Democrats to increase the corporate tax rate and raise other corporate taxes based on claims of relatively low tax collections following the Tax Cuts and Jobs Act (TCJA) in 2017.

Should Tax Policy Play a Role in Tobacco Harm Reduction?

October 8, 2021

In an effort to raise roughly $100 billion, the House proposal would double cigarette taxes and increase all other tobacco and nicotine taxes to comparable rates—a strategy with severe unintended consequences.

How Would the Ways and Means Proposal Affect Profit Shifting?

October 7, 2021

If Congress wants to reduce profit shifting, the proposal from the Ways and Means Committee is not an effective tool for this.

Testimony: Joint Economic Committee Hearing on the Revenue Provisions of the Build Back Better Act

October 6, 2021

Tax Foundation testimony at the Joint Economic Committee hearing on the revenue provisions in the Build Back Better Act and related analysis on their estimated impact.

Which Industries Would the Tax Hikes Target?

October 5, 2021

Using Tax Foundation’s Multinational Tax Model, we estimate the effective tax rates on controlled foreign corporation (CFC) profits under current law and under each of the proposed plans for business tax hikes.

Placing the House Build Back Better Act Tax Increases in Historical Context

October 4, 2021

If the spending in the $3.5 trillion budget resolution were financed entirely from tax increases, it would rival as a share of GDP the tax increases used to finance World War II and the Korean War.

Proposed Top Combined Marginal Capital Gains Tax Rate Would Be Third-Highest in OECD

October 4, 2021

Under the House Build Back Better Act (BBBA), the United States would tax capital gains at the third-highest top marginal rate among rich nations, averaging nearly 37 percent.

2017 Tax Changes Increase the Benefit of Uncapping SALT Deductions for High Income Taxpayers

October 4, 2021

Our analysis illustrates how restoring the SALT deduction now would be more regressive than under prior law, strengthening the case for keeping the cap in place.

How Heavily Taxed Are U.S. Multinationals?

September 29, 2021

In general, the effective tax rates on the foreign profits of U.S. multinationals are not that low relative to the U.S. tax rate, contrary to popular rhetoric.

Carbon Tax: Weighing the Options for Financing Reconciliation

September 29, 2021

A carbon tax would be a less economically harmful pay-for than either personal or corporate income tax hikes and a more efficient way to reduce carbon emissions than green energy tax credits, but would come with other trade-offs.

History of Attempted Changes to Step-Up in Basis Shows Perilous Road Ahead

September 28, 2021

As Congress considers President Biden’s proposal to tax unrealized capital gains at death, the history of previous efforts suggests it faces a perilous road ahead. Lawmakers must resolve tricky design and implementation details that derailed past attempts to change how capital gains are treated when assets are passed from one generation to the next.

U.S. Corporate Income Faces Third-Highest Integrated Tax Rate in OECD Under Ways and Means Plan

September 27, 2021

Under the House Ways and Means tax plan, the United States would tax corporate income at the third-highest integrated tax rate among rich nations, averaging 56.6 percent.

Choose Your Own Adventure: Global Minimum Tax Edition

September 27, 2021

Over the course of the last year, it has become clear that Democratic lawmakers want to change U.S. international tax rules. However, as proposals have surfaced in recent weeks, there are clear divides among various proposals.

Latest White House Report Tells Incomplete Story on Average Tax Rates for Wealthy

September 24, 2021

The White House Council of Economic Advisors (CEA)'s recent report estimates the average federal individual income tax rate for the top 400 wealthiest households in the U.S to be 8.2 percent, lower than typically estimated for top earners.

Economy Loses More than Revenue Gains in Ways and Means “Build Back Better” Act

September 22, 2021

As Congress debates next steps on the tax provisions in the House Ways & Means Build Back Better Act, it is important to consider the economic impacts, which include reduced economic output, wages, and jobs. Due to the plan’s economically costly and inefficient tax increases, we find that long-run GDP would drop by more than $2 for every $1 in new tax revenue.

The Good, the Bad, and the Ugly of the Ways and Means Plan

September 20, 2021

The latest version of the Biden Build Back Better agenda, released last week by the House Ways and Means committee, is dense, with too many provisions to flesh out completely. Here’s a rundown of the good, the bad, and the ugly of it.

Federal Tobacco Tax Proposal Could Result in 50% Increase in State Taxes

September 20, 2021

The potential federal tax increase of over 1,600 percent on dipping tobacco as a result of the House Democrats' proposal could result in state taxes and retail prices increasing by more than 50 percent in certain states.

Yes, the U.S. Tax Code Is Progressive

September 17, 2021

As Congress considers several tax proposals designed to raise taxes on high-income earners, it’s worth considering the distribution of the existing tax code.

How Would House Dems’ Tax Plan Change Competitiveness of U.S. Tax Code?

September 17, 2021

The legislation put forward by Democratic members of the House of Representatives would reverse many of the 2017 reforms while increasing burdens on businesses and workers.

U.S. Would Have Third-Highest Corporate Tax Rate in OECD Under Ways and Means Plan

September 15, 2021

Under the Ways and Means text, the U.S. would have an average corporate tax rate of 30.9 percent, which would be the third-highest corporate tax rate in the OECD, behind only Colombia and Portugal.

Corporations in Most States Would Face Income Tax Rate Exceeding 30 Percent Under Ways and Means Proposal

September 15, 2021

Under the House Democrats' tax plan, companies in 21 states and D.C. would face a higher corporate tax rate than in any country in the OECD.

Top Combined Capital Gains Tax Rates Would Average Nearly 37 Percent Under House Dems’ Plan

September 14, 2021

Seven states would face combined top marginal capital gains tax rates of more than 40 percent, nearing the top rate among OECD countries, currently levied by Denmark at 42 percent.

House Tobacco Proposals Defy Biden’s Tax Pledge and Undermine Harm Reduction Efforts

September 13, 2021

House Democrats’ newly released $3.5 trillion tax legislation includes a tax increase on tobacco, nicotine, and vapor products levied on tobacco manufacturers. But ultimately it would fall heavily on tobacco consumers—many of the group that earns less than $400,000 that President Biden pledged would not see a tax increase.

Build Back Better Act: Details & Analysis of the $3.5 Trillion Budget Reconciliation Bill

September 16, 2021

According to our analysis, the House Ways & Means reconciliation tax plan would increase federal revenue on net by $1.06 trillion over the next decade, but would also reduce long-run economic output by 0.98 percent, eliminate 303,000 full-time equivalent jobs in the United States, and reduce after-tax incomes for the top 80 percent of taxpayers over the long-run.

Tax on Stock Buybacks a Misguided Way to Encourage Investment

September 10, 2021

Research shows that a tax on stock buybacks would not be the right policy solution to encourage long-term investment or lift wages.

Tax Reform and Infrastructure Investment: The Two Theories

September 9, 2021

The Biden administration does have a point about how some components of the infrastructure bill could put downward pressure on inflation in the long term. However, the taxes chosen to pay for those investments would counteract those effects, by reducing investment and productivity growth.

Don’t Copy European Drug Pricing Policies that Reduced R&D and Innovation

September 9, 2021

Rather than pursuing policies that have demonstrably reduced R&D and innovation elsewhere, and that would disincentivize R&D in the U.S., lawmakers should continue to ensure an ecosystem that encourages risk-taking and R&D.

Treasury Minimum Tax Argument Relies on Narrow Interpretation of Current/Proposed Rules

September 8, 2021

As Congress prepares to rewrite some portion of the current international tax rules, it’s hoped that they are able to achieve a more principled approach and one that is not so subject to obfuscation and misinterpretation.

Reviewing Wyden’s Reconciliation Tax Policy Proposals

September 7, 2021

Congressional lawmakers are putting together a reconciliation bill to enact much of President Biden’s Build Back Better agenda. Many lawmakers including Senate Finance Committee Chair Ron Wyden (D-OR), however, want to make their own mark on the legislation.

Top Ten Congressional Districts Impacted by Biden Corporate Tax Proposals

September 7, 2021

The Biden corporate tax plan would disproportionately harm these congressional districts and make the U.S. less internationally competitive. These tax hikes, along with individual tax increases, would also raise taxes on net for 96 percent of congressional districts by 2031 after these temporary credits expire in 2025.

Wyden’s Financial Services Tax Proposals Would Put “Mark-to-Market” to the Test

September 7, 2021

Mark-to-market is not simple to implement, as it involves new administrative and compliance challenges for taxpayers. Mark-to-market levies tax on phantom income, requiring some taxpayers to engage in some degree of liquidation, ultimately suppressing incentives to save and invest. The limited tax revenues that could result from these proposals are not worth the risk.

Tax Foundation Comments on the Wyden, Warner, Brown Discussion Draft

September 7, 2021

The proposed restructuring of the GILTI and FDII regimes makes several changes to the tax base that are largely offsetting, leaving virtually all the revenue potential to be determined by the tax rates on GILTI and FDII and the haircuts on foreign tax credits. Lawmakers should carefully weigh the trade-offs between higher tax revenues and competitiveness.

Temporary Policies Complicate the Child Tax Credit’s Future

September 3, 2021

Over the next ten years, the structure of the Child Tax Credit (CTC) is scheduled to change, complicating efforts to extend enhanced CTC benefits or reform the CTC for the long-term. Rather than take an all-or-nothing approach or kick the can down the road by relying on temporary expansions, lawmakers could consider alternative options that better target low-income households, retain work incentives, reduce the impact on federal revenue, and provide taxpayers with a stable, consistent tax code.

GILTI of Neglecting Losses

September 1, 2021

As lawmakers are reviewing international tax rules and determining what to change and update, they should pay attention to the way GILTI interacts with profitable and loss-making companies.

A Guide to the Fossil Fuel Provisions of the Biden Budget

September 2, 2021

Lawmakers’ Tax Rate to Help Pay for Reconciliation is 1,900 Percent

August 31, 2021

While the excise tax penalty in H.R. 3 is referred to as a 95 percent tax rate, it actually amounts to a 1,900 percent tax rate because of how the proposal defines the tax base. In other words, under the H.R. 3 tax penalty, a drug that sells for $100 would incur a $1,900 tax.

The DASH Act Isn’t the Best Way to Solve the Housing Crisis

August 30, 2021

To tackle problems of homelessness and housing costs, Senator Ron Wyden (D-OR) has released a major tax proposal, the Decent Affordable Safe Housing (DASH) For All Act. Several of Wyden’s proposals are also components of the Biden administration's infrastructure agenda, with a large focus on tax credits designed to either incentivize new housing or directly reduce rent burdens.

Don’t Add More Temporary Tax Policies in Budget Reconciliation

August 30, 2021

Temporary policy creates uncertainty for taxpayers and scheduling more expirations will add to the already-expiring provisions under the Tax Cuts and Jobs Act (TCJA) of 2017.

5 Things to Consider in the Tax Gap Discussion

August 27, 2021

Increasing tax compliance is a major part of the Biden administration proposal to raise revenue for physical and social infrastructure. Reducing the tax gap—the difference between taxes owed and taxes paid—is a good way to raise revenue, but it doesn’t come without trade-offs, and it’s important to go about it in the right way.

Expense Allocation: A Hidden Tax on Domestic Activities and Foreign Profits

August 26, 2021

While arcane, expense allocation rules are relevant to current debates because they result in a heavier tax burden for U.S. companies under current law than the recently negotiated global minimum tax proposal.

Paying for Reconciliation Bill with “Health Care Savings” Threatens Medical Innovation

August 25, 2021

One of the ways lawmakers intend to pay for $3.5 trillion of new spending in the budget reconciliation package is by creating “health care savings.” The leading proposal to achieve this is H.R. 3, the Elijah Cummings Lower Drug Costs Now Act, which would change the way that prescription drug prices are negotiated under Medicare Part D.

Reviewing Benefits of the State and Local Tax Deduction by County in 2018

August 25, 2021

It is important to understand how the SALT deduction’s benefits have changed since the SALT cap was put into place in 2018 before repealing the cap or making the deduction more generous. Doing so would disproportionately benefit higher earners, making the tax code more regressive.

International Tax Proposals and Profit Shifting

August 24, 2021

There are many ways the U.S.’s international tax rules could be changed, reformed, improved, or worsened. Reflexively jacking up taxes on U.S. multinationals does not necessarily accomplish the goal of reducing or eliminating profit shifting, and it would in fact worsen it.

Claiming 97 Percent of Small Businesses Exempt from Biden Taxes Is Misleading

August 20, 2021

The Biden administration recently cited an analysis from Treasury claiming that “the President’s agenda will protect 97 percent of small business owners from income tax rate increases.” However, the figure is misleading. To assess the economic effect of higher marginal tax rates, it matters how much income or investment will be affected—not how many taxpayers.

COVID-19 Tax Relief Added to Increasing Share of Households Paying No Income Tax

August 20, 2021

According to the Tax Policy Center, an estimated 60 percent of U.S. households paid no income tax in 2020, up from around 43 percent of households in 2019.

Considering Trade-offs to Improving Tax Collections

August 18, 2021

Recent Biden administration proposals rely heavily on revenue from better IRS tax collections to fund spending initiatives. The American Families Plan uses several avenues to reduce the tax gap (or the difference between taxes paid and taxes owed), from increasing the IRS's tax enforcement budget to improving information technology and expanding reporting requirements.

Adoption of Global Minimum Tax Could Raise U.S. Revenue…or Not

August 19, 2021

This interaction between the U.S. proposals and those that may be put into law in foreign jurisdictions should give lawmakers caution when evaluating the revenue potential of changes to GILTI.

Evaluating Trade-Offs of Expanded Premium Tax Credits as Enrollment Period Ends

August 16, 2021

August 15th was the deadline to take advantage of the premium tax credits originally provided in the Affordable Care Act and recently expanded in the American Rescue Plan. Future extensions may provide longer-lasting benefits, although the extensions may create trade-offs for consumer choice and program costs.

Four Revenue Scores on Options to Change U.S. International Tax Rules

August 17, 2021

Changes to international tax rules are likely on the way, and it is therefore important for lawmakers to understand how various reform options would impact U.S. tax burdens on multinational companies. Moreover, policymakers should also recognize the need for prudent policies that do not put U.S.-based multinationals at a competitive disadvantage or severely curtail investment and hiring.

How Biden’s Tax Plans Could Negatively Impact Housing

August 13, 2021

While President Biden has many proposals aimed at increasing the supply of affordable housing, including tax credits, his plans to raise business taxes could hinder that goal.

Tax Treatment of Nuclear Energy Should Be Simplified, Neutral, with Renewable Energy Sources

August 12, 2021

Tackling climate change and shifting the economy towards renewable energy has been a key part of the Biden administration’s agenda. However, this effort must first confront an overly complicated and non-neutral tax code, particularly in how it treats nuclear energy, for the White House to reach its ambitious goals.

Senator Warren’s Corporate Book Tax Is Wrong Way to Fund New Spending

August 11, 2021

The arguments for a new surtax on corporate book income misconstrues why there are differences between a corporation’s taxable income and book income.

Will FDII Stay or Will it Go?

August 10, 2021

While the Biden administration has certainly proposed to remove FDII, it is not clear that Congress is on board with that approach.

Options for Reforming the Taxation of U.S. Multinationals

August 12, 2021

The Biden administration’s international tax proposals would impose a 7.7 percent surtax on the foreign profits of U.S. multinationals, resulting in a net increase in profit shifting out of the U.S.

Striking Right Balance for Cryptocurrency Reporting Requirements in Bipartisan Infrastructure Package

August 6, 2021

While it makes sense to ensure cryptocurrency transactions are treated similarly to other financial assets, the nature of these requirements as written are potentially unworkable.

Should the U.S. Copy Denmark’s Social Welfare Policies?

August 3, 2021

To fully follow the Scandinavian model would require additional taxes that place a higher burden on middle-income earners, but instead, Biden proposes higher taxes on corporations and households making more than $400,000.

Comparing Three Financing Options for President Biden’s Spending Proposals

August 3, 2021

While Congress continues to debate how to pay for President Biden’s spending proposals in the fiscal year 2022 budget, it is useful to consider the economic impact of a range of financing options in addition to the President’s proposed tax increases.

The Bipartisan Infrastructure Plan Avoids Tax Increases, Undermines User-Pay Principle, and Misses Chance to Modernize Obsolete Programs

July 30, 2021

The good news is that lawmakers avoided raising taxes to cover the cost of the new spending and instead used some reasonable fees and asset sales. The bad news is that half of the offsets come from unused, debt-financed COVID-19 relief funds and the economic return on many of these investments is questionable.

How Did We Ever Agree to Fund Infrastructure Investments?

July 28, 2021

As lawmakers explore funding mechanisms for additional federal infrastructure investment, they should focus on permanent, sustainable, and transparent revenue options that conform to the benefit principle. Permanent user fees, appropriately adjusted to restore and maintain their purchasing power, would serve as ideal revenue sources for federal infrastructure investments.

Simplifying the Tax Code and Reducing the Tax Gap: What Can Be Achieved?

July 28, 2021

Reducing the tax gap is, on the margin, a good way to raise revenue, but is not without costs. Policymakers should consider compliance costs for law-abiding taxpayers as well as administrative costs for the IRS when evaluating measures to reduce the tax gap.

Intellectual Property Came Back to U.S. after Tax Reform, but Proposals Could Change That

July 21, 2021

Intellectual property is a key driver in the current economy. Among other things, intellectual property includes patents for life-saving drugs and vaccines and software that runs applications on phones and computers.

Dynamic Scoring of Infrastructure Spending Proposals Offsets Small Portion of the Cost

July 20, 2021

While it is good that policymakers are taking the impact of the economy on tax revenue seriously, it is important to remember that the dynamic effect of increased spending would only offset a small portion of the total spending. In other words, new spending—like tax cuts—rarely pays for itself.

IRS Sends Nearly $15 Billion of Advance Child Tax Credit Payments

July 19, 2021

New Treasury Department data released on the advance Child Tax Credit payments shows the distribution by state, including how much, on average, households in each state received. The expansion will only be in effect for the 2021 tax year—if policymakers wish to continue providing the increased benefits, they must address the administrative and revenue costs of the policy.

How Biden’s Business Tax Proposals Would Impact Taxpayers Across States

July 19, 2021

The Biden administration has targeted U.S. businesses, including corporations and passthrough entities, to raise revenue to fund new spending. However, individual taxpayers across America will end up footing the bill.

Piling on the GILTI Verdicts

July 15, 2021

The Biden administration has proposed to significantly increase the tax burden on foreign income through a policy known as Global Intangible Low-Tax Income (GILTI). While the administration’s rhetoric focuses on doubling the tax rate on GILTI from 10.5 percent to 21 percent, this is less than half the story.

Biden Plan’s Higher Taxation of Businesses Would Boost Collections to Highest in 40-Plus Years

July 8, 2021

President Biden’s tax proposals released as part of his fiscal year 2022 budget would collect about $2 trillion in new tax revenue from businesses over 10 years. This new revenue would bring income tax collections on businesses as a portion of GDP to its highest level on a sustained basis in over 40 years.

Unanswered Questions about Upcoming Advance Child Tax Credit Payments

July 7, 2021

Amidst the outstanding questions, potential confusion over how advanced child tax credit payments will affect tax refunds, and an incomplete portal to update taxpayer information, the IRS will begin sending payments to millions of households this month.

What’s in the New Global Tax Agreement?

October 8, 2021

If the global tax agreement is fully implemented, large U.S. companies would pay less to the U.S. government and more to overseas governments while the foreign earnings of companies would face higher taxes.

Biden’s Tax Proposals Could Impact Small Businesses Over Time

July 7, 2021

The Biden administration has primarily focused on increasing taxes on top earners to generate revenue to fund its spending priorities. However, these proposals would hit many pass-through businesses and much of pass-through business income, including small businesses, family-owned businesses, and farms.

Biden’s Top Marginal Capital Gains Tax Rate Would Be Highest in OECD

July 6, 2021

President Biden’s proposal to tax capital gains at higher, ordinary income tax rates would lead the U.S. to have the highest top marginal tax rate on capital gains in the OECD.

The Impact of the Biden Administration’s Tax Proposals by State and Congressional District

June 30, 2021

The redistribution of income from the Biden administration's tax proposals would involve many winners and losers, not only across different types of taxpayers but also geographically across the country. Launch our new interactive map to see average tax changes by state and congressional district over the budget window from 2022 to 2031. 

Eight Ways to Compare the Biden Proposals to the Global Minimum Tax

June 21, 2021

While President Biden has led a renewed effort on global negotiations over minimum taxation, his own proposals for U.S. companies differ significantly from proposals that had previously been discussed at the international level. In fact, if other countries implement a policy as was outlined last year, then Biden’s proposal would be a significantly more burdensome policy for U.S. businesses than what other countries might adopt.

Expensing Is Infrastructure, Too

June 15, 2021

The Biden administration has suggested several tax increases for his infrastructure plan. Public infrastructure can help increase economic growth, but by raising taxes on private investment, the net effect on growth may be negative. However, tax options like retaining expensing for private R&D investment or making 100 percent bonus depreciation for equipment permanent would be complementary to the goals of infrastructure spending.

Details and Analysis of President Biden’s FY 2022 Budget Proposals

June 16, 2021

When combining the economic impact of President Biden's tax proposals with the benefit of infrastructure spending, we estimate that long-run GDP would decrease by 0.9 percent and American incomes would fall by an average of 1 percent, resulting in 165,000 fewer American jobs.

Tracking the 2021 Biden Tax Plan and Federal Tax Proposals

June 16, 2021

Taxes are once again at the forefront of the public policy debate as legislators grapple with how to fund new infrastructure spending, among other priorities. Our tax tracker helps you stay up-to-date as new tax plans emerge from the Biden administration and Congress.

Who Bears the Burden of Corporation Taxation? A Review of Recent Evidence

June 10, 2021

The Biden administration has pledged to not raise taxes on anyone earning less than $400,000 a year. However, the administration’s corporate tax proposals would likely violate that pledge, given that corporations are comprised of people who also might earn less than $400,000.

Combined Effect of a Higher Corporate Rate and Permanent Bonus Depreciation

June 15, 2021

The negative effects of President Biden’s proposed 28 percent corporate income tax rate could be tempered by improving how the corporate income tax base treats investment expenses.

Infrastructure Funding for Highways Digs into Issues of Outdated Taxes and Narrow Bases

June 10, 2021

As spending priorities are dividing lawmakers trying to negotiate among the various federal infrastructure plans, less time is being spent on the funding of one of the key components—our highways, both current and future taxes and fees. One of the current taxes, a federal excise tax on heavy commercial vehicles and trailers, is an important revenue generator, but its flawed tax design has a negative impact on investment and leads to unstable revenue.

Broad-Based Taxes on Consumption and User Fees Are Efficient Ways to Raise Federal Revenue for Infrastructure

June 10, 2021

Rather than relying on damaging corporate tax hikes, policymakers should consider user fees and consumption taxes as options for financing new infrastructure to ensure that a compromise does not end up being a net negative for the U.S. economy.

Biden Proposals Would Significantly Expand Benefits Administered Through the Tax Code

June 3, 2021

The Biden administration will have to balance the desire to increase social spending through the tax code with the need to collect revenue and have a tax system that is transparent and easy to understand.

Details and Analysis of President Biden’s American Jobs Plan

June 4, 2021

We estimate the infrastructure spending would increase long-run GDP by 0.3 percent, but this positive economic effect is entirely offset by the increase in corporate taxation, resulting in less corporate investment which reduces GDP by 0.5 percent in the long run, reduces wages by 0.5 percent, and eliminates 101,000 full-time equivalent jobs.

Repealing Tariffs Would Be a Simple Option to Boost U.S. Economic Growth

June 1, 2021

Of the many tax policies modeled in our new Options for Reforming America’s Tax Code 2.0, repealing the tariffs imposed under President Trump’s administration would be one of the simplest ways policymakers could boost economic growth.

Two Important Issues that Must Be Resolved in “Global Tax Reform”

May 25, 2021

If the U.S. is suggesting a 15 percent effective rate as the minimum acceptable rate for a global agreement, then the tax bases of the various minimum taxes adopted as part of the agreement should be aligned to minimize complexities and unintended consequences.

Biden Administration Changes to GILTI and FDII Will Yield Automatic State Tax Increases

May 25, 2021

State taxation of GILTI is unconventional and economically uncompetitive and will become even more so if the federal government adopts a more aggressive approach to taxing GILTI, as outlined in the American Jobs Plan Act.

Reviewing Recent Evidence of the Effect of Taxes on Economic Growth

May 21, 2021

With the Biden administration proposing a variety of new taxes, it is worth revisiting the literature on how taxes, particularly on corporate and individual income, can impact economic growth.

GILTI by Country Is Not as Simple as it Seems

May 18, 2021

If policymakers want a recipe to dramatically expand the complexity of U.S. international tax rules and the burden on U.S. multinational businesses, then a tax on foreign earnings calculated at the country level would be the way to do it. Alternatively, policymakers could focus on mitigating the unintended consequences of GILTI and other recent international tax rules.

How Biden’s Corporate Tax Increases Could Make Tax Enforcement Harder

May 18, 2021

If Biden wants to reduce tax evasion, raising the corporate rate, increasing the incentives to engage in tax evasion, and creating a larger tax advantage to becoming a pass-through business is counterproductive.

Financing Infrastructure Spending with Corporate Tax Increases Would Stunt Economic Growth

May 14, 2021

The Biden administration’s American Jobs Plan proposal to fund infrastructure spending relies on a bet that the benefits outweigh the costs of a higher corporate tax burden. Using the Tax Foundation model, we find that this trade-off is a bad one for the U.S. economy, resulting in reduced GDP, less capital investment, fewer jobs, and lower wages.

Taxing Unrealized Capital Gains at Death Is Unlikely to Raise Revenue Advertised

May 12, 2021

As part of the tax proposals in President Biden’s American Families Plan, unrealized capital gains over $1 million would be taxed at death. However, this policy would likely raise less revenue than advocates expect after considering the proposal’s impact on taxpayer behavior, including capital gains realizations, and historical capital gains and estate tax revenue collections.

Many Small Businesses Could Be Impacted by Biden Corporate Tax Proposals

May 11, 2021

Policymakers should recognize that corporate tax hikes will not only impact large firms, but many smaller and younger firms as well. Considering that many of these smaller firms are significant contributors to net job growth, raising corporate taxes at this time would not be conducive for a speedy economic recovery.

Treasury Rule on State Tax Cuts Limitation Raises New Questions

May 10, 2021

Today, the U.S. Treasury issued an interim final rule on the $350 billion in State and Local Fiscal Recovery Funds provided under the American Rescue Plan Act (ARPA). The proposed rule resolves several important questions but continues to involve the federal government in state finances at an extraordinary level.

Details and Analysis of Tax Proposals in President Biden’s American Families Plan

May 6, 2021

The Biden administration’s proposed American Families Plan would partially pay for about $1.8 trillion in new federal spending on education and family programs with about $661 billion in additional taxes on higher-income individuals and pass-through businesses like partnerships, sole proprietorships, and S corporations.

25 Percent Corporate Income Tax Rate Would Make U.S. Above Average Compared to Peers

May 4, 2021

Some lawmakers have expressed concerns about President Biden’s proposal to raise the federal corporate income tax rate from 21 percent to 28 percent, and instead suggest raising the rate to 25 percent.

U.S. Top Combined Integrated Tax Rate on Corporate Income Would Become Highest in the OECD

May 3, 2021

Under President Biden’s tax plan, the United States would tax corporate income at the highest top rate in the industrialized world, averaging 65.1 percent.

Tax Policy in the First 100 Days of the Biden Administration

April 30, 2021

In his first 100 days as president, Joe Biden has proposed more than a dozen significant changes to the U.S. tax code that would raise upwards of $3 trillion in revenue and reduce incentives to invest, save, and work in the United States.

Effects of Proposed International Tax Changes on U.S. Multinationals

April 28, 2021

The international corporate tax changes in President Biden’s tax plan would increase tax rates on domestic income more than on foreign income, resulting in a net increase in profit shifting out of the US, according to our Multinational Tax Model.

Testimony: Tax Fairness, Economic Growth, and Funding Government Investments

April 27, 2021

Economic research and Tax Foundation modeling indicate there is a negative trade-off between progressive taxes on capital income—such as the wealth tax, minimum book tax on corporate income, and a higher corporate tax rate—and economic growth.

Biden’s Proposed Capital Gains Tax Rate Would be Highest for Many in a Century

April 26, 2021

The Biden administration is proposing to tax long-term capital gains at ordinary income rates for high earners, which will bring the top federal rate to highs not seen since the 1920s.

Top Combined Capital Gains Tax Rates Would Average 48 Percent Under Biden’s Tax Plan

April 23, 2021

The top federal rate on capital gains would be 43.4 percent under Biden's tax plan (when including the net investment income tax). Rates would be even higher in many U.S. states due to state and local capital gains taxes, leading to a combined average rate of over 48 percent compared to about 29 percent under current law.

Corporate Investment Outweighs Federal Revenue Losses Since TCJA

April 22, 2021

The Biden administration has argued for raising the corporate tax rate to offset the drop in federal corporate revenues following the Tax Cuts and Jobs Act (TCJA) of 2017, claiming it did not lead to more corporate investment as advertised. Although corporate revenues did drop following this tax reform, the ensuing increase in corporate investment far exceeds these revenue losses.

Raising the Corporate Rate to 28 Percent Reduces GDP by $720 Billion Over Ten Years

April 21, 2021

The Options guide presents the economic effects we estimate would occur in the long term, or 20 to 30 years from now, but we can also use our model to show the cumulative effects of the policy change—providing more context, for instance, about how the effects of a higher corporate income tax rate compound over time, which we estimate would reduce GDP by a cumulative $720 billion over the next 10 years.

Business Tax Collections Within Historical Norm After Accounting for Pass-through Business Taxes

April 15, 2021

A common argument for raising the corporate income tax rate is that collections as a share of gross domestic product (GDP) fell after the rate was reduced to 21 percent as part of the Tax Cuts and Jobs Act (TCJA) in 2017. But that argument is incomplete, as the U.S. also has a large pass-through business sector where taxes are collected through the individual income tax system.

Treasury’s Latest Pillar 1 Proposal: A Strategy to Split the Riches or Give Away the Store?

April 14, 2021

New international tax rules on super-profits would disproportionately impact U.S. companies however they are designed. The question that Treasury should answer is why limit the policy in such a way that magnifies that disproportionate application and the risk to the U.S. tax base.

Labor Share of Net Income is Within Its Historical Range

April 13, 2021

President Biden’s administration argues in the Made in America Tax Plan that corporate taxes should be raised to address a declining share of national income accruing to labor. The problem with the argument, which primarily relies on measures of gross domestic income, is it ignores that some income doesn’t accrue to workers or capital owners.

Biden’s Corporate Minimum Book Tax Narrows, but Problems and Uncertainties Remain

April 13, 2021

The corporate tax base should be reformed directly, rather than piecemeal through a complicated and burdensome separate tax applicable to a small number of companies.

Biden’s Tax Plan Would Restore U.S. Exceptionalism—But Not in a Good Way

April 9, 2021

No other country has tried to enforce some of the policies that the Biden administration is proposing. Embarking on such uncharted course would set the U.S. apart from global tax policy norms and best practices and could harm American competitiveness.

The Balancing Act of GILTI and FDII

April 7, 2021

The tax treatment of intangible assets has come into the spotlight recently with the Biden administration proposing to undo a policy adopted in 2017 to encourage intellectual property (IP) to be located in the U.S.

U.S. Effective Corporate Tax Rate Is Right in Line With Its OECD Peers

April 2, 2021

Whether we use corporate tax collections as a portion of GDP, average effective tax rates, or marginal tax rates, each measure shows that the U.S. effective corporate tax burden is close to or above the average compared to its OECD peers. Raising corporate income taxes would put the U.S. at a competitive disadvantage, whether one looks at statutory tax rates or effective corporate tax rates.

Combined Corporate Rates Would Exceed 30 Percent in Most States Under Biden’s Tax Plan

April 1, 2021

While the focus has been on the federal rate, it is important to include state tax rates when thinking about the total tax burden on corporate income.

President Biden’s Infrastructure Plan Raises Taxes on U.S. Production

March 31, 2021

An increase in the federal corporate tax rate to 28 percent would raise the U.S. federal-state combined tax rate to 32.34 percent, higher than every country in the OECD, the G7, and all our major trade partners and competitors including China.

CBO Study: Benefits of Biden’s $2 Trillion Infrastructure Plan Won’t Outweigh $2 Trillion Tax Hike

March 31, 2021

The economics is clear: If Biden wants to maximize the economic benefits of his $3 trillion in new infrastructure spending, he should cut $3 trillion in other government spending to pay for it.

Making the Expanded Child Tax Credit Permanent Would Cost Nearly $1.6 Trillion

March 19, 2021

As the Biden administration and Congress consider making the expanded child tax credit permanent, a nearly $1.6 trillion expansion of tax code-administered benefits, they should consider financing it in a way that doesn’t create significant headwinds to economic recovery.

TCJA Is Not GILTI of Offshoring

March 18, 2021

Many members of Congress have taken issue with the 2017 tax reform. However, the reasoning that has led some to believe that GILTI provides a path to offshoring investment and jobs is flawed.

How GILTI Are U.S. Industries?

March 16, 2021

Both the Biden campaign and some Democratic members of Congress have recommended changes to GILTI, but before doing that, policymakers should consider how GILTI’s design can have ramifications for many U.S. companies and their tax burdens.

The American Rescue Plan Act Greatly Expands Benefits through the Tax Code in 2021

March 12, 2021

The major tax-related benefits in the $1.9 trillion economic relief plan are a third round of direct payments, extended unemployment insurance (UI) benefits and a $10,200 unemployment insurance income exemption for 2020, and an expansion of the Child Tax Credit.

Phasing in a Corporate Rate Hike Would Be the Worst of Both Worlds

March 9, 2021

The Biden administration has signaled its openness to raising the corporate tax rate, potentially by phasing in an increase over several years. While phasing in a tax increase, as opposed to hiking immediately, may seem like a reasonable middle ground, it would be the worst of both worlds because it provides old investment with a lower rate while penalizing new investment.

Can GILTI and the GloBE be Harmonized in a Biden Administration?

March 4, 2021

While there are several parts of the policy that are subject to further discussion and agreement, GloBE is expected to be different from GILTI in several ways.

Evaluating Proposals to Increase the Corporate Tax Rate and Levy a Minimum Tax on Corporate Book Income

February 24, 2021

President Biden and congressional policymakers have proposed several changes to the corporate income tax, including raising the rate from 21 percent to 28 percent and imposing a 15 percent minimum tax on the book income of large corporations, to raise revenue for new spending programs. Our new modeling analyzes the economic, revenue, and distributional impact of these proposals.

U.S. Cross-border Tax Reform and the Cautionary Tale of GILTI

February 17, 2021

The Biden campaign and Senate Democrats identified changes to GILTI that would increase the taxes U.S. companies pay on their foreign earnings. Rather than tacking on changes to a system that is currently neither fully territorial nor worldwide, policymakers should evaluate the structure of the current system with a goal of it becoming more, not less, coherent.

5 Observations on Janet Yellen’s Recent Confirmation Testimony

January 22, 2021

In her recent confirmation hearing, economist Janet Yellen, President Biden’s choice for Treasury Secretary, sought to reassure markets that the new administration would not raise corporate taxes until the economy improves. At the same time, however, she sent a troubling signal that when they do push for higher corporate tax rates, they would do so in coordination with other countries so that the U.S. doesn’t lose its competitive edge.

President Biden Outlines Plan for Additional Coronavirus-Related Relief and Stimulus

January 15, 2021

President Biden's plan builds on previous relief packages and would include larger payments to individuals, expanded relief for households and small businesses, funding for vaccine distribution, and aid to state and local governments.

Potential Regulatory Changes in Tax Policy Under the Biden Administration

November 24, 2020

President Biden may make greater use of regulatory changes to modify how tax law is interpreted and administered. There are several areas where a Biden Treasury Department, likely led by former Federal Reserve Chair Janet Yellen, may focus.

Biden Could Provide Business and Household Relief by Eliminating Trump Tariffs

November 16, 2020

Biden has not specified how he would approach the Trump tariffs, though his advisers have said he will at least review them.

Prospects for Federal Tax Policy After the 2020 Election

November 10, 2020

President Biden and Congress should concentrate on areas of common ground, finding incremental places to improve the tax code. A bipartisan bill recently introduced to help retirement savings is a good model for what incremental reform may look like.

Joe Biden’s 61 Percent Tax on Wealth

April 29, 2021

Biden may have rejected a Bernie Sanders-style wealth tax, but the President is proposing other ways of taxing wealth without explicitly labeling his policies a wealth tax—by as much as 61 percent.

Top Rates in Each State Under Joe Biden’s Tax Plan

October 20, 2020

President Joe Biden’s tax plan would yield combined top marginal state and local rates in excess of 60 percent in three states: California, Hawaii, and New Jersey (also New York City).

How Would Biden’s Tax Plan Change the Competitiveness of the U.S. Tax Code?

October 19, 2020

While the Biden campaign is certainly focused on increasing taxes on U.S. businesses and high-income earners, it is important that policymakers also understand what that reversal might do to U.S. competitiveness, and the competitive global environment in which U.S. companies and U.S. workers operate.

How Should Wealth and Work Be Treated in the Tax Code?

September 21, 2020

Joe Biden recently released a piece reviewing his tax proposals, contrasting them with President Donald Trump’s tax ideas. A major theme within this piece can be summarized in the title: “A Tale of Two Tax Policies: Trump Rewards Wealth, Biden Rewards Work.”

Biden’s Plan to Address Offshoring Comes with Contradictions

September 9, 2020

If the goal of the Biden campaign is to bring new investment and jobs to the U.S., it is doubtful that these new tax rules will contribute to that goal.

Placing Joe Biden’s Tax Increases in Historical Context

October 22, 2020

If we consider Biden’s tax plan over the entire budget window (2021 to 2030) as a percentage of GDP—1.30 percent—it would rank as the 6th largest tax increase since the 1940s and and one of the largest tax increases not associated with wartime funding.

Biden’s Proposal Would Shift the Distribution of Retirement Tax Benefits

August 26, 2020

One of Biden’s tax proposals that has gotten little attention is a change that would shift the benefits of tax deferral in traditional retirement accounts toward lower- and middle-income earners. The plan would reduce the tax benefit for those earning above $80,250 but under $400,000, violating Biden’s tax pledge to not raise taxes on earners below the $400,000 threshold.

Reviewing Joe Biden’s Tax Vision

August 20, 2020

Biden’s tax vision is twofold: higher taxes on high-income earners and businesses paired with more generous provisions for specific activities and households.

Biden’s Plan to Boost Research and Development Should Include Cancellation of Upcoming R&D Amortization

July 13, 2020

As concern over American competitiveness and onshoring of innovative activity increases, presidential candidates and policymakers should keep in mind the tax increases scheduled to take effect in the coming years, including the amortization of R&D and phaseout of the broader expensing provisions.

Details and Analysis of President Joe Biden’s Campaign Tax Plan

October 22, 2020

What has President Joe Biden proposed in terms of tax policy changes? Our experts provide the details and analyze the potential economic, revenue, and distributional impacts.

Biden’s Minimum Book Income Tax Proposal Would Create Needless Complexity

December 13, 2019

Unpacking Biden’s Tax Plan for Capital Gains

July 31, 2019

Anti-Base Erosion Provisions and Territorial Tax Systems in OECD Countries

May 2, 2019

The U.S. decision to adopt a territorial tax system is certainly an improvement over having a worldwide system. However, in moving to a territorial system some of the new features created with the TCJA increased the complexity of the system.

Federal Capital Gains Tax Collections, Historical Data (1954-2018)

April 26, 2021

Proposal for Reporting Requirements for Financial Institutions Misses the Mark

October 20, 2021

Reducing the tax gap is a good idea, but the reporting requirements for financial institutions could be better-targeted at the problem at hand.

What’s Going on with the Child Tax Credit Debate?

October 19, 2021

President Biden expanded and fundamentally changed the Child Tax Credit (CTC) for one year in the American Rescue Plan (ARP) passed in March 2021. Policymakers are now deciding the future of the expansion as part of the proposed reconciliation package, but a wide range of estimates for the effects of a permanent expansion is confusing the debate.

Wrong Tax Base Leads to Multiple Issues for Federal Nicotine Tax Proposal

October 18, 2021

The tobacco and nicotine tax proposal in the Build Back Better Act neglects sound excise tax policy design and focuses solely on revenue generation.

Higher Taxes Under House Ways and Means Plan Emphasize Need for Corporate Integration

October 13, 2021

Under the House Ways and Means plan to raise taxes on corporations and individuals, the integrated tax rate on corporate income would rise to the third highest in the OECD. To reduce this burden, policymakers could explore integrating the individual and corporate tax systems.

Corporate Tax Revenue Hit an All-Time High in 2021

October 12, 2021

This year’s robust corporate tax collections calls into question efforts by the administration and congressional Democrats to increase the corporate tax rate and raise other corporate taxes based on claims of relatively low tax collections following the Tax Cuts and Jobs Act (TCJA) in 2017.

Should Tax Policy Play a Role in Tobacco Harm Reduction?

October 8, 2021

In an effort to raise roughly $100 billion, the House proposal would double cigarette taxes and increase all other tobacco and nicotine taxes to comparable rates—a strategy with severe unintended consequences.

How Would the Ways and Means Proposal Affect Profit Shifting?

October 7, 2021

If Congress wants to reduce profit shifting, the proposal from the Ways and Means Committee is not an effective tool for this.

Testimony: Joint Economic Committee Hearing on the Revenue Provisions of the Build Back Better Act

October 6, 2021

Tax Foundation testimony at the Joint Economic Committee hearing on the revenue provisions in the Build Back Better Act and related analysis on their estimated impact.

Which Industries Would the Tax Hikes Target?

October 5, 2021

Using Tax Foundation’s Multinational Tax Model, we estimate the effective tax rates on controlled foreign corporation (CFC) profits under current law and under each of the proposed plans for business tax hikes.

Placing the House Build Back Better Act Tax Increases in Historical Context

October 4, 2021

If the spending in the $3.5 trillion budget resolution were financed entirely from tax increases, it would rival as a share of GDP the tax increases used to finance World War II and the Korean War.

Proposed Top Combined Marginal Capital Gains Tax Rate Would Be Third-Highest in OECD

October 4, 2021

Under the House Build Back Better Act (BBBA), the United States would tax capital gains at the third-highest top marginal rate among rich nations, averaging nearly 37 percent.

2017 Tax Changes Increase the Benefit of Uncapping SALT Deductions for High Income Taxpayers

October 4, 2021

Our analysis illustrates how restoring the SALT deduction now would be more regressive than under prior law, strengthening the case for keeping the cap in place.

Carbon Tax: Weighing the Options for Financing Reconciliation

September 29, 2021

A carbon tax would be a less economically harmful pay-for than either personal or corporate income tax hikes and a more efficient way to reduce carbon emissions than green energy tax credits, but would come with other trade-offs.

History of Attempted Changes to Step-Up in Basis Shows Perilous Road Ahead

September 28, 2021

As Congress considers President Biden’s proposal to tax unrealized capital gains at death, the history of previous efforts suggests it faces a perilous road ahead. Lawmakers must resolve tricky design and implementation details that derailed past attempts to change how capital gains are treated when assets are passed from one generation to the next.

U.S. Corporate Income Faces Third-Highest Integrated Tax Rate in OECD Under Ways and Means Plan

September 27, 2021

Under the House Ways and Means tax plan, the United States would tax corporate income at the third-highest integrated tax rate among rich nations, averaging 56.6 percent.

Choose Your Own Adventure: Global Minimum Tax Edition

September 27, 2021

Over the course of the last year, it has become clear that Democratic lawmakers want to change U.S. international tax rules. However, as proposals have surfaced in recent weeks, there are clear divides among various proposals.

Latest White House Report Tells Incomplete Story on Average Tax Rates for Wealthy

September 24, 2021

The White House Council of Economic Advisors (CEA)'s recent report estimates the average federal individual income tax rate for the top 400 wealthiest households in the U.S to be 8.2 percent, lower than typically estimated for top earners.

Economy Loses More than Revenue Gains in Ways and Means “Build Back Better” Act

September 22, 2021

As Congress debates next steps on the tax provisions in the House Ways & Means Build Back Better Act, it is important to consider the economic impacts, which include reduced economic output, wages, and jobs. Due to the plan’s economically costly and inefficient tax increases, we find that long-run GDP would drop by more than $2 for every $1 in new tax revenue.

The Good, the Bad, and the Ugly of the Ways and Means Plan

September 20, 2021

The latest version of the Biden Build Back Better agenda, released last week by the House Ways and Means committee, is dense, with too many provisions to flesh out completely. Here’s a rundown of the good, the bad, and the ugly of it.

Federal Tobacco Tax Proposal Could Result in 50% Increase in State Taxes

September 20, 2021

The potential federal tax increase of over 1,600 percent on dipping tobacco as a result of the House Democrats' proposal could result in state taxes and retail prices increasing by more than 50 percent in certain states.

Yes, the U.S. Tax Code Is Progressive

September 17, 2021

As Congress considers several tax proposals designed to raise taxes on high-income earners, it’s worth considering the distribution of the existing tax code.

How Would House Dems’ Tax Plan Change Competitiveness of U.S. Tax Code?

September 17, 2021

The legislation put forward by Democratic members of the House of Representatives would reverse many of the 2017 reforms while increasing burdens on businesses and workers.

U.S. Would Have Third-Highest Corporate Tax Rate in OECD Under Ways and Means Plan

September 15, 2021

Under the Ways and Means text, the U.S. would have an average corporate tax rate of 30.9 percent, which would be the third-highest corporate tax rate in the OECD, behind only Colombia and Portugal.

Corporations in Most States Would Face Income Tax Rate Exceeding 30 Percent Under Ways and Means Proposal

September 15, 2021

Under the House Democrats' tax plan, companies in 21 states and D.C. would face a higher corporate tax rate than in any country in the OECD.

Top Combined Capital Gains Tax Rates Would Average Nearly 37 Percent Under House Dems’ Plan

September 14, 2021

Seven states would face combined top marginal capital gains tax rates of more than 40 percent, nearing the top rate among OECD countries, currently levied by Denmark at 42 percent.

House Tobacco Proposals Defy Biden’s Tax Pledge and Undermine Harm Reduction Efforts

September 13, 2021

House Democrats’ newly released $3.5 trillion tax legislation includes a tax increase on tobacco, nicotine, and vapor products levied on tobacco manufacturers. But ultimately it would fall heavily on tobacco consumers—many of the group that earns less than $400,000 that President Biden pledged would not see a tax increase.

Build Back Better Act: Details & Analysis of the $3.5 Trillion Budget Reconciliation Bill

September 16, 2021

According to our analysis, the House Ways & Means reconciliation tax plan would increase federal revenue on net by $1.06 trillion over the next decade, but would also reduce long-run economic output by 0.98 percent, eliminate 303,000 full-time equivalent jobs in the United States, and reduce after-tax incomes for the top 80 percent of taxpayers over the long-run.

Tax on Stock Buybacks a Misguided Way to Encourage Investment

September 10, 2021

Research shows that a tax on stock buybacks would not be the right policy solution to encourage long-term investment or lift wages.

Don’t Copy European Drug Pricing Policies that Reduced R&D and Innovation

September 9, 2021

Rather than pursuing policies that have demonstrably reduced R&D and innovation elsewhere, and that would disincentivize R&D in the U.S., lawmakers should continue to ensure an ecosystem that encourages risk-taking and R&D.

Reviewing Wyden’s Reconciliation Tax Policy Proposals

September 7, 2021

Congressional lawmakers are putting together a reconciliation bill to enact much of President Biden’s Build Back Better agenda. Many lawmakers including Senate Finance Committee Chair Ron Wyden (D-OR), however, want to make their own mark on the legislation.

Wyden’s Financial Services Tax Proposals Would Put “Mark-to-Market” to the Test

September 7, 2021

Mark-to-market is not simple to implement, as it involves new administrative and compliance challenges for taxpayers. Mark-to-market levies tax on phantom income, requiring some taxpayers to engage in some degree of liquidation, ultimately suppressing incentives to save and invest. The limited tax revenues that could result from these proposals are not worth the risk.

Lawmakers’ Tax Rate to Help Pay for Reconciliation is 1,900 Percent

August 31, 2021

While the excise tax penalty in H.R. 3 is referred to as a 95 percent tax rate, it actually amounts to a 1,900 percent tax rate because of how the proposal defines the tax base. In other words, under the H.R. 3 tax penalty, a drug that sells for $100 would incur a $1,900 tax.

The DASH Act Isn’t the Best Way to Solve the Housing Crisis

August 30, 2021

To tackle problems of homelessness and housing costs, Senator Ron Wyden (D-OR) has released a major tax proposal, the Decent Affordable Safe Housing (DASH) For All Act. Several of Wyden’s proposals are also components of the Biden administration's infrastructure agenda, with a large focus on tax credits designed to either incentivize new housing or directly reduce rent burdens.

Don’t Add More Temporary Tax Policies in Budget Reconciliation

August 30, 2021

Temporary policy creates uncertainty for taxpayers and scheduling more expirations will add to the already-expiring provisions under the Tax Cuts and Jobs Act (TCJA) of 2017.

Paying for Reconciliation Bill with “Health Care Savings” Threatens Medical Innovation

August 25, 2021

One of the ways lawmakers intend to pay for $3.5 trillion of new spending in the budget reconciliation package is by creating “health care savings.” The leading proposal to achieve this is H.R. 3, the Elijah Cummings Lower Drug Costs Now Act, which would change the way that prescription drug prices are negotiated under Medicare Part D.

Reviewing Benefits of the State and Local Tax Deduction by County in 2018

August 25, 2021

It is important to understand how the SALT deduction’s benefits have changed since the SALT cap was put into place in 2018 before repealing the cap or making the deduction more generous. Doing so would disproportionately benefit higher earners, making the tax code more regressive.

Evaluating Trade-Offs of Expanded Premium Tax Credits as Enrollment Period Ends

August 16, 2021

August 15th was the deadline to take advantage of the premium tax credits originally provided in the Affordable Care Act and recently expanded in the American Rescue Plan. Future extensions may provide longer-lasting benefits, although the extensions may create trade-offs for consumer choice and program costs.

Senator Warren’s Corporate Book Tax Is Wrong Way to Fund New Spending

August 11, 2021

The arguments for a new surtax on corporate book income misconstrues why there are differences between a corporation’s taxable income and book income.

Economy Loses More than Revenue Gains in Ways and Means “Build Back Better” Act

September 22, 2021

As Congress debates next steps on the tax provisions in the House Ways & Means Build Back Better Act, it is important to consider the economic impacts, which include reduced economic output, wages, and jobs. Due to the plan’s economically costly and inefficient tax increases, we find that long-run GDP would drop by more than $2 for every $1 in new tax revenue.

The Good, the Bad, and the Ugly of the Ways and Means Plan

September 20, 2021

The latest version of the Biden Build Back Better agenda, released last week by the House Ways and Means committee, is dense, with too many provisions to flesh out completely. Here’s a rundown of the good, the bad, and the ugly of it.

Tax Reform and Infrastructure Investment: The Two Theories

September 9, 2021

The Biden administration does have a point about how some components of the infrastructure bill could put downward pressure on inflation in the long term. However, the taxes chosen to pay for those investments would counteract those effects, by reducing investment and productivity growth.

Top Ten Congressional Districts Impacted by Biden Corporate Tax Proposals

September 7, 2021

The Biden corporate tax plan would disproportionately harm these congressional districts and make the U.S. less internationally competitive. These tax hikes, along with individual tax increases, would also raise taxes on net for 96 percent of congressional districts by 2031 after these temporary credits expire in 2025.

GILTI of Neglecting Losses

September 1, 2021

As lawmakers are reviewing international tax rules and determining what to change and update, they should pay attention to the way GILTI interacts with profitable and loss-making companies.

A Guide to the Fossil Fuel Provisions of the Biden Budget

September 2, 2021

Claiming 97 Percent of Small Businesses Exempt from Biden Taxes Is Misleading

August 20, 2021

The Biden administration recently cited an analysis from Treasury claiming that “the President’s agenda will protect 97 percent of small business owners from income tax rate increases.” However, the figure is misleading. To assess the economic effect of higher marginal tax rates, it matters how much income or investment will be affected—not how many taxpayers.

Should the U.S. Copy Denmark’s Social Welfare Policies?

August 3, 2021

To fully follow the Scandinavian model would require additional taxes that place a higher burden on middle-income earners, but instead, Biden proposes higher taxes on corporations and households making more than $400,000.

Comparing Three Financing Options for President Biden’s Spending Proposals

August 3, 2021

While Congress continues to debate how to pay for President Biden’s spending proposals in the fiscal year 2022 budget, it is useful to consider the economic impact of a range of financing options in addition to the President’s proposed tax increases.

Dynamic Scoring of Infrastructure Spending Proposals Offsets Small Portion of the Cost

July 20, 2021

While it is good that policymakers are taking the impact of the economy on tax revenue seriously, it is important to remember that the dynamic effect of increased spending would only offset a small portion of the total spending. In other words, new spending—like tax cuts—rarely pays for itself.

How Biden’s Business Tax Proposals Would Impact Taxpayers Across States

July 19, 2021

The Biden administration has targeted U.S. businesses, including corporations and passthrough entities, to raise revenue to fund new spending. However, individual taxpayers across America will end up footing the bill.

Biden Plan’s Higher Taxation of Businesses Would Boost Collections to Highest in 40-Plus Years

July 8, 2021

President Biden’s tax proposals released as part of his fiscal year 2022 budget would collect about $2 trillion in new tax revenue from businesses over 10 years. This new revenue would bring income tax collections on businesses as a portion of GDP to its highest level on a sustained basis in over 40 years.

The Impact of the Biden Administration’s Tax Proposals by State and Congressional District

June 30, 2021

The redistribution of income from the Biden administration's tax proposals would involve many winners and losers, not only across different types of taxpayers but also geographically across the country. Launch our new interactive map to see average tax changes by state and congressional district over the budget window from 2022 to 2031. 

Expensing Is Infrastructure, Too

June 15, 2021

The Biden administration has suggested several tax increases for his infrastructure plan. Public infrastructure can help increase economic growth, but by raising taxes on private investment, the net effect on growth may be negative. However, tax options like retaining expensing for private R&D investment or making 100 percent bonus depreciation for equipment permanent would be complementary to the goals of infrastructure spending.

Details and Analysis of President Biden’s FY 2022 Budget Proposals

June 16, 2021

When combining the economic impact of President Biden's tax proposals with the benefit of infrastructure spending, we estimate that long-run GDP would decrease by 0.9 percent and American incomes would fall by an average of 1 percent, resulting in 165,000 fewer American jobs.

Tracking the 2021 Biden Tax Plan and Federal Tax Proposals

June 16, 2021

Taxes are once again at the forefront of the public policy debate as legislators grapple with how to fund new infrastructure spending, among other priorities. Our tax tracker helps you stay up-to-date as new tax plans emerge from the Biden administration and Congress.

Who Bears the Burden of Corporation Taxation? A Review of Recent Evidence

June 10, 2021

The Biden administration has pledged to not raise taxes on anyone earning less than $400,000 a year. However, the administration’s corporate tax proposals would likely violate that pledge, given that corporations are comprised of people who also might earn less than $400,000.

Combined Effect of a Higher Corporate Rate and Permanent Bonus Depreciation

June 15, 2021

The negative effects of President Biden’s proposed 28 percent corporate income tax rate could be tempered by improving how the corporate income tax base treats investment expenses.

Infrastructure Funding for Highways Digs into Issues of Outdated Taxes and Narrow Bases

June 10, 2021

As spending priorities are dividing lawmakers trying to negotiate among the various federal infrastructure plans, less time is being spent on the funding of one of the key components—our highways, both current and future taxes and fees. One of the current taxes, a federal excise tax on heavy commercial vehicles and trailers, is an important revenue generator, but its flawed tax design has a negative impact on investment and leads to unstable revenue.

Broad-Based Taxes on Consumption and User Fees Are Efficient Ways to Raise Federal Revenue for Infrastructure

June 10, 2021

Rather than relying on damaging corporate tax hikes, policymakers should consider user fees and consumption taxes as options for financing new infrastructure to ensure that a compromise does not end up being a net negative for the U.S. economy.

Details and Analysis of President Biden’s American Jobs Plan

June 4, 2021

We estimate the infrastructure spending would increase long-run GDP by 0.3 percent, but this positive economic effect is entirely offset by the increase in corporate taxation, resulting in less corporate investment which reduces GDP by 0.5 percent in the long run, reduces wages by 0.5 percent, and eliminates 101,000 full-time equivalent jobs.

Biden Administration Changes to GILTI and FDII Will Yield Automatic State Tax Increases

May 25, 2021

State taxation of GILTI is unconventional and economically uncompetitive and will become even more so if the federal government adopts a more aggressive approach to taxing GILTI, as outlined in the American Jobs Plan Act.

How Biden’s Corporate Tax Increases Could Make Tax Enforcement Harder

May 18, 2021

If Biden wants to reduce tax evasion, raising the corporate rate, increasing the incentives to engage in tax evasion, and creating a larger tax advantage to becoming a pass-through business is counterproductive.

Financing Infrastructure Spending with Corporate Tax Increases Would Stunt Economic Growth

May 14, 2021

The Biden administration’s American Jobs Plan proposal to fund infrastructure spending relies on a bet that the benefits outweigh the costs of a higher corporate tax burden. Using the Tax Foundation model, we find that this trade-off is a bad one for the U.S. economy, resulting in reduced GDP, less capital investment, fewer jobs, and lower wages.

25 Percent Corporate Income Tax Rate Would Make U.S. Above Average Compared to Peers

May 4, 2021

Some lawmakers have expressed concerns about President Biden’s proposal to raise the federal corporate income tax rate from 21 percent to 28 percent, and instead suggest raising the rate to 25 percent.

Tax Policy in the First 100 Days of the Biden Administration

April 30, 2021

In his first 100 days as president, Joe Biden has proposed more than a dozen significant changes to the U.S. tax code that would raise upwards of $3 trillion in revenue and reduce incentives to invest, save, and work in the United States.

Effects of Proposed International Tax Changes on U.S. Multinationals

April 28, 2021

The international corporate tax changes in President Biden’s tax plan would increase tax rates on domestic income more than on foreign income, resulting in a net increase in profit shifting out of the US, according to our Multinational Tax Model.

Testimony: Tax Fairness, Economic Growth, and Funding Government Investments

April 27, 2021

Economic research and Tax Foundation modeling indicate there is a negative trade-off between progressive taxes on capital income—such as the wealth tax, minimum book tax on corporate income, and a higher corporate tax rate—and economic growth.

Labor Share of Net Income is Within Its Historical Range

April 13, 2021

President Biden’s administration argues in the Made in America Tax Plan that corporate taxes should be raised to address a declining share of national income accruing to labor. The problem with the argument, which primarily relies on measures of gross domestic income, is it ignores that some income doesn’t accrue to workers or capital owners.

Combined Corporate Rates Would Exceed 30 Percent in Most States Under Biden’s Tax Plan

April 1, 2021

While the focus has been on the federal rate, it is important to include state tax rates when thinking about the total tax burden on corporate income.

President Biden’s Infrastructure Plan Raises Taxes on U.S. Production

March 31, 2021

An increase in the federal corporate tax rate to 28 percent would raise the U.S. federal-state combined tax rate to 32.34 percent, higher than every country in the OECD, the G7, and all our major trade partners and competitors including China.

CBO Study: Benefits of Biden’s $2 Trillion Infrastructure Plan Won’t Outweigh $2 Trillion Tax Hike

March 31, 2021

The economics is clear: If Biden wants to maximize the economic benefits of his $3 trillion in new infrastructure spending, he should cut $3 trillion in other government spending to pay for it.

Evaluating Proposals to Increase the Corporate Tax Rate and Levy a Minimum Tax on Corporate Book Income

February 24, 2021

President Biden and congressional policymakers have proposed several changes to the corporate income tax, including raising the rate from 21 percent to 28 percent and imposing a 15 percent minimum tax on the book income of large corporations, to raise revenue for new spending programs. Our new modeling analyzes the economic, revenue, and distributional impact of these proposals.

History of Attempted Changes to Step-Up in Basis Shows Perilous Road Ahead

September 28, 2021

As Congress considers President Biden’s proposal to tax unrealized capital gains at death, the history of previous efforts suggests it faces a perilous road ahead. Lawmakers must resolve tricky design and implementation details that derailed past attempts to change how capital gains are treated when assets are passed from one generation to the next.

Economy Loses More than Revenue Gains in Ways and Means “Build Back Better” Act

September 22, 2021

As Congress debates next steps on the tax provisions in the House Ways & Means Build Back Better Act, it is important to consider the economic impacts, which include reduced economic output, wages, and jobs. Due to the plan’s economically costly and inefficient tax increases, we find that long-run GDP would drop by more than $2 for every $1 in new tax revenue.

The Good, the Bad, and the Ugly of the Ways and Means Plan

September 20, 2021

The latest version of the Biden Build Back Better agenda, released last week by the House Ways and Means committee, is dense, with too many provisions to flesh out completely. Here’s a rundown of the good, the bad, and the ugly of it.

Tax Reform and Infrastructure Investment: The Two Theories

September 9, 2021

The Biden administration does have a point about how some components of the infrastructure bill could put downward pressure on inflation in the long term. However, the taxes chosen to pay for those investments would counteract those effects, by reducing investment and productivity growth.

Temporary Policies Complicate the Child Tax Credit’s Future

September 3, 2021

Over the next ten years, the structure of the Child Tax Credit (CTC) is scheduled to change, complicating efforts to extend enhanced CTC benefits or reform the CTC for the long-term. Rather than take an all-or-nothing approach or kick the can down the road by relying on temporary expansions, lawmakers could consider alternative options that better target low-income households, retain work incentives, reduce the impact on federal revenue, and provide taxpayers with a stable, consistent tax code.

5 Things to Consider in the Tax Gap Discussion

August 27, 2021

Increasing tax compliance is a major part of the Biden administration proposal to raise revenue for physical and social infrastructure. Reducing the tax gap—the difference between taxes owed and taxes paid—is a good way to raise revenue, but it doesn’t come without trade-offs, and it’s important to go about it in the right way.

Claiming 97 Percent of Small Businesses Exempt from Biden Taxes Is Misleading

August 20, 2021

The Biden administration recently cited an analysis from Treasury claiming that “the President’s agenda will protect 97 percent of small business owners from income tax rate increases.” However, the figure is misleading. To assess the economic effect of higher marginal tax rates, it matters how much income or investment will be affected—not how many taxpayers.

Considering Trade-offs to Improving Tax Collections

August 18, 2021

Recent Biden administration proposals rely heavily on revenue from better IRS tax collections to fund spending initiatives. The American Families Plan uses several avenues to reduce the tax gap (or the difference between taxes paid and taxes owed), from increasing the IRS's tax enforcement budget to improving information technology and expanding reporting requirements.

Should the U.S. Copy Denmark’s Social Welfare Policies?

August 3, 2021

To fully follow the Scandinavian model would require additional taxes that place a higher burden on middle-income earners, but instead, Biden proposes higher taxes on corporations and households making more than $400,000.

Comparing Three Financing Options for President Biden’s Spending Proposals

August 3, 2021

While Congress continues to debate how to pay for President Biden’s spending proposals in the fiscal year 2022 budget, it is useful to consider the economic impact of a range of financing options in addition to the President’s proposed tax increases.

Simplifying the Tax Code and Reducing the Tax Gap: What Can Be Achieved?

July 28, 2021

Reducing the tax gap is, on the margin, a good way to raise revenue, but is not without costs. Policymakers should consider compliance costs for law-abiding taxpayers as well as administrative costs for the IRS when evaluating measures to reduce the tax gap.

How Biden’s Business Tax Proposals Would Impact Taxpayers Across States

July 19, 2021

The Biden administration has targeted U.S. businesses, including corporations and passthrough entities, to raise revenue to fund new spending. However, individual taxpayers across America will end up footing the bill.

Biden Plan’s Higher Taxation of Businesses Would Boost Collections to Highest in 40-Plus Years

July 8, 2021

President Biden’s tax proposals released as part of his fiscal year 2022 budget would collect about $2 trillion in new tax revenue from businesses over 10 years. This new revenue would bring income tax collections on businesses as a portion of GDP to its highest level on a sustained basis in over 40 years.

Biden’s Tax Proposals Could Impact Small Businesses Over Time

July 7, 2021

The Biden administration has primarily focused on increasing taxes on top earners to generate revenue to fund its spending priorities. However, these proposals would hit many pass-through businesses and much of pass-through business income, including small businesses, family-owned businesses, and farms.

Biden’s Top Marginal Capital Gains Tax Rate Would Be Highest in OECD

July 6, 2021

President Biden’s proposal to tax capital gains at higher, ordinary income tax rates would lead the U.S. to have the highest top marginal tax rate on capital gains in the OECD.

The Impact of the Biden Administration’s Tax Proposals by State and Congressional District

June 30, 2021

The redistribution of income from the Biden administration's tax proposals would involve many winners and losers, not only across different types of taxpayers but also geographically across the country. Launch our new interactive map to see average tax changes by state and congressional district over the budget window from 2022 to 2031. 

Details and Analysis of President Biden’s FY 2022 Budget Proposals

June 16, 2021

When combining the economic impact of President Biden's tax proposals with the benefit of infrastructure spending, we estimate that long-run GDP would decrease by 0.9 percent and American incomes would fall by an average of 1 percent, resulting in 165,000 fewer American jobs.

Tracking the 2021 Biden Tax Plan and Federal Tax Proposals

June 16, 2021

Taxes are once again at the forefront of the public policy debate as legislators grapple with how to fund new infrastructure spending, among other priorities. Our tax tracker helps you stay up-to-date as new tax plans emerge from the Biden administration and Congress.

Biden Proposals Would Significantly Expand Benefits Administered Through the Tax Code

June 3, 2021

The Biden administration will have to balance the desire to increase social spending through the tax code with the need to collect revenue and have a tax system that is transparent and easy to understand.

Taxing Unrealized Capital Gains at Death Is Unlikely to Raise Revenue Advertised

May 12, 2021

As part of the tax proposals in President Biden’s American Families Plan, unrealized capital gains over $1 million would be taxed at death. However, this policy would likely raise less revenue than advocates expect after considering the proposal’s impact on taxpayer behavior, including capital gains realizations, and historical capital gains and estate tax revenue collections.

Details and Analysis of Tax Proposals in President Biden’s American Families Plan

May 6, 2021

The Biden administration’s proposed American Families Plan would partially pay for about $1.8 trillion in new federal spending on education and family programs with about $661 billion in additional taxes on higher-income individuals and pass-through businesses like partnerships, sole proprietorships, and S corporations.

Tax Policy in the First 100 Days of the Biden Administration

April 30, 2021

In his first 100 days as president, Joe Biden has proposed more than a dozen significant changes to the U.S. tax code that would raise upwards of $3 trillion in revenue and reduce incentives to invest, save, and work in the United States.

Biden’s Proposed Capital Gains Tax Rate Would be Highest for Many in a Century

April 26, 2021

The Biden administration is proposing to tax long-term capital gains at ordinary income rates for high earners, which will bring the top federal rate to highs not seen since the 1920s.

Top Combined Capital Gains Tax Rates Would Average 48 Percent Under Biden’s Tax Plan

April 23, 2021

The top federal rate on capital gains would be 43.4 percent under Biden's tax plan (when including the net investment income tax). Rates would be even higher in many U.S. states due to state and local capital gains taxes, leading to a combined average rate of over 48 percent compared to about 29 percent under current law.

Joe Biden’s 61 Percent Tax on Wealth

April 29, 2021

Biden may have rejected a Bernie Sanders-style wealth tax, but the President is proposing other ways of taxing wealth without explicitly labeling his policies a wealth tax—by as much as 61 percent.

Federal Capital Gains Tax Collections, Historical Data (1954-2018)

April 26, 2021

Should Tax Policy Play a Role in Tobacco Harm Reduction?

October 8, 2021

In an effort to raise roughly $100 billion, the House proposal would double cigarette taxes and increase all other tobacco and nicotine taxes to comparable rates—a strategy with severe unintended consequences.

Testimony: Joint Economic Committee Hearing on the Revenue Provisions of the Build Back Better Act

October 6, 2021

Tax Foundation testimony at the Joint Economic Committee hearing on the revenue provisions in the Build Back Better Act and related analysis on their estimated impact.

Proposed Top Combined Marginal Capital Gains Tax Rate Would Be Third-Highest in OECD

October 4, 2021

Under the House Build Back Better Act (BBBA), the United States would tax capital gains at the third-highest top marginal rate among rich nations, averaging nearly 37 percent.

History of Attempted Changes to Step-Up in Basis Shows Perilous Road Ahead

September 28, 2021

As Congress considers President Biden’s proposal to tax unrealized capital gains at death, the history of previous efforts suggests it faces a perilous road ahead. Lawmakers must resolve tricky design and implementation details that derailed past attempts to change how capital gains are treated when assets are passed from one generation to the next.

Latest White House Report Tells Incomplete Story on Average Tax Rates for Wealthy

September 24, 2021

The White House Council of Economic Advisors (CEA)'s recent report estimates the average federal individual income tax rate for the top 400 wealthiest households in the U.S to be 8.2 percent, lower than typically estimated for top earners.

Economy Loses More than Revenue Gains in Ways and Means “Build Back Better” Act

September 22, 2021

As Congress debates next steps on the tax provisions in the House Ways & Means Build Back Better Act, it is important to consider the economic impacts, which include reduced economic output, wages, and jobs. Due to the plan’s economically costly and inefficient tax increases, we find that long-run GDP would drop by more than $2 for every $1 in new tax revenue.

The Good, the Bad, and the Ugly of the Ways and Means Plan

September 20, 2021

The latest version of the Biden Build Back Better agenda, released last week by the House Ways and Means committee, is dense, with too many provisions to flesh out completely. Here’s a rundown of the good, the bad, and the ugly of it.

How Would House Dems’ Tax Plan Change Competitiveness of U.S. Tax Code?

September 17, 2021

The legislation put forward by Democratic members of the House of Representatives would reverse many of the 2017 reforms while increasing burdens on businesses and workers.

Tax Reform and Infrastructure Investment: The Two Theories

September 9, 2021

The Biden administration does have a point about how some components of the infrastructure bill could put downward pressure on inflation in the long term. However, the taxes chosen to pay for those investments would counteract those effects, by reducing investment and productivity growth.

Reviewing Wyden’s Reconciliation Tax Policy Proposals

September 7, 2021

Congressional lawmakers are putting together a reconciliation bill to enact much of President Biden’s Build Back Better agenda. Many lawmakers including Senate Finance Committee Chair Ron Wyden (D-OR), however, want to make their own mark on the legislation.

Wyden’s Financial Services Tax Proposals Would Put “Mark-to-Market” to the Test

September 7, 2021

Mark-to-market is not simple to implement, as it involves new administrative and compliance challenges for taxpayers. Mark-to-market levies tax on phantom income, requiring some taxpayers to engage in some degree of liquidation, ultimately suppressing incentives to save and invest. The limited tax revenues that could result from these proposals are not worth the risk.

Temporary Policies Complicate the Child Tax Credit’s Future

September 3, 2021

Over the next ten years, the structure of the Child Tax Credit (CTC) is scheduled to change, complicating efforts to extend enhanced CTC benefits or reform the CTC for the long-term. Rather than take an all-or-nothing approach or kick the can down the road by relying on temporary expansions, lawmakers could consider alternative options that better target low-income households, retain work incentives, reduce the impact on federal revenue, and provide taxpayers with a stable, consistent tax code.

Don’t Add More Temporary Tax Policies in Budget Reconciliation

August 30, 2021

Temporary policy creates uncertainty for taxpayers and scheduling more expirations will add to the already-expiring provisions under the Tax Cuts and Jobs Act (TCJA) of 2017.

5 Things to Consider in the Tax Gap Discussion

August 27, 2021

Increasing tax compliance is a major part of the Biden administration proposal to raise revenue for physical and social infrastructure. Reducing the tax gap—the difference between taxes owed and taxes paid—is a good way to raise revenue, but it doesn’t come without trade-offs, and it’s important to go about it in the right way.

Reviewing Benefits of the State and Local Tax Deduction by County in 2018

August 25, 2021

It is important to understand how the SALT deduction’s benefits have changed since the SALT cap was put into place in 2018 before repealing the cap or making the deduction more generous. Doing so would disproportionately benefit higher earners, making the tax code more regressive.

Claiming 97 Percent of Small Businesses Exempt from Biden Taxes Is Misleading

August 20, 2021

The Biden administration recently cited an analysis from Treasury claiming that “the President’s agenda will protect 97 percent of small business owners from income tax rate increases.” However, the figure is misleading. To assess the economic effect of higher marginal tax rates, it matters how much income or investment will be affected—not how many taxpayers.

COVID-19 Tax Relief Added to Increasing Share of Households Paying No Income Tax

August 20, 2021

According to the Tax Policy Center, an estimated 60 percent of U.S. households paid no income tax in 2020, up from around 43 percent of households in 2019.

Considering Trade-offs to Improving Tax Collections

August 18, 2021

Recent Biden administration proposals rely heavily on revenue from better IRS tax collections to fund spending initiatives. The American Families Plan uses several avenues to reduce the tax gap (or the difference between taxes paid and taxes owed), from increasing the IRS's tax enforcement budget to improving information technology and expanding reporting requirements.

Striking Right Balance for Cryptocurrency Reporting Requirements in Bipartisan Infrastructure Package

August 6, 2021

While it makes sense to ensure cryptocurrency transactions are treated similarly to other financial assets, the nature of these requirements as written are potentially unworkable.

Comparing Three Financing Options for President Biden’s Spending Proposals

August 3, 2021

While Congress continues to debate how to pay for President Biden’s spending proposals in the fiscal year 2022 budget, it is useful to consider the economic impact of a range of financing options in addition to the President’s proposed tax increases.

The Bipartisan Infrastructure Plan Avoids Tax Increases, Undermines User-Pay Principle, and Misses Chance to Modernize Obsolete Programs

July 30, 2021

The good news is that lawmakers avoided raising taxes to cover the cost of the new spending and instead used some reasonable fees and asset sales. The bad news is that half of the offsets come from unused, debt-financed COVID-19 relief funds and the economic return on many of these investments is questionable.

How Did We Ever Agree to Fund Infrastructure Investments?

July 28, 2021

As lawmakers explore funding mechanisms for additional federal infrastructure investment, they should focus on permanent, sustainable, and transparent revenue options that conform to the benefit principle. Permanent user fees, appropriately adjusted to restore and maintain their purchasing power, would serve as ideal revenue sources for federal infrastructure investments.

Simplifying the Tax Code and Reducing the Tax Gap: What Can Be Achieved?

July 28, 2021

Reducing the tax gap is, on the margin, a good way to raise revenue, but is not without costs. Policymakers should consider compliance costs for law-abiding taxpayers as well as administrative costs for the IRS when evaluating measures to reduce the tax gap.

Dynamic Scoring of Infrastructure Spending Proposals Offsets Small Portion of the Cost

July 20, 2021

While it is good that policymakers are taking the impact of the economy on tax revenue seriously, it is important to remember that the dynamic effect of increased spending would only offset a small portion of the total spending. In other words, new spending—like tax cuts—rarely pays for itself.

IRS Sends Nearly $15 Billion of Advance Child Tax Credit Payments

July 19, 2021

New Treasury Department data released on the advance Child Tax Credit payments shows the distribution by state, including how much, on average, households in each state received. The expansion will only be in effect for the 2021 tax year—if policymakers wish to continue providing the increased benefits, they must address the administrative and revenue costs of the policy.

How Biden’s Business Tax Proposals Would Impact Taxpayers Across States

July 19, 2021

The Biden administration has targeted U.S. businesses, including corporations and passthrough entities, to raise revenue to fund new spending. However, individual taxpayers across America will end up footing the bill.

Unanswered Questions about Upcoming Advance Child Tax Credit Payments

July 7, 2021

Amidst the outstanding questions, potential confusion over how advanced child tax credit payments will affect tax refunds, and an incomplete portal to update taxpayer information, the IRS will begin sending payments to millions of households this month.

The Impact of the Biden Administration’s Tax Proposals by State and Congressional District

June 30, 2021

The redistribution of income from the Biden administration's tax proposals would involve many winners and losers, not only across different types of taxpayers but also geographically across the country. Launch our new interactive map to see average tax changes by state and congressional district over the budget window from 2022 to 2031. 

Details and Analysis of President Biden’s FY 2022 Budget Proposals

June 16, 2021

When combining the economic impact of President Biden's tax proposals with the benefit of infrastructure spending, we estimate that long-run GDP would decrease by 0.9 percent and American incomes would fall by an average of 1 percent, resulting in 165,000 fewer American jobs.

Tracking the 2021 Biden Tax Plan and Federal Tax Proposals

June 16, 2021

Taxes are once again at the forefront of the public policy debate as legislators grapple with how to fund new infrastructure spending, among other priorities. Our tax tracker helps you stay up-to-date as new tax plans emerge from the Biden administration and Congress.

Infrastructure Funding for Highways Digs into Issues of Outdated Taxes and Narrow Bases

June 10, 2021

As spending priorities are dividing lawmakers trying to negotiate among the various federal infrastructure plans, less time is being spent on the funding of one of the key components—our highways, both current and future taxes and fees. One of the current taxes, a federal excise tax on heavy commercial vehicles and trailers, is an important revenue generator, but its flawed tax design has a negative impact on investment and leads to unstable revenue.

Broad-Based Taxes on Consumption and User Fees Are Efficient Ways to Raise Federal Revenue for Infrastructure

June 10, 2021

Rather than relying on damaging corporate tax hikes, policymakers should consider user fees and consumption taxes as options for financing new infrastructure to ensure that a compromise does not end up being a net negative for the U.S. economy.

Biden Proposals Would Significantly Expand Benefits Administered Through the Tax Code

June 3, 2021

The Biden administration will have to balance the desire to increase social spending through the tax code with the need to collect revenue and have a tax system that is transparent and easy to understand.

Repealing Tariffs Would Be a Simple Option to Boost U.S. Economic Growth

June 1, 2021

Of the many tax policies modeled in our new Options for Reforming America’s Tax Code 2.0, repealing the tariffs imposed under President Trump’s administration would be one of the simplest ways policymakers could boost economic growth.

Reviewing Recent Evidence of the Effect of Taxes on Economic Growth

May 21, 2021

With the Biden administration proposing a variety of new taxes, it is worth revisiting the literature on how taxes, particularly on corporate and individual income, can impact economic growth.

Taxing Unrealized Capital Gains at Death Is Unlikely to Raise Revenue Advertised

May 12, 2021

As part of the tax proposals in President Biden’s American Families Plan, unrealized capital gains over $1 million would be taxed at death. However, this policy would likely raise less revenue than advocates expect after considering the proposal’s impact on taxpayer behavior, including capital gains realizations, and historical capital gains and estate tax revenue collections.

Many Small Businesses Could Be Impacted by Biden Corporate Tax Proposals

May 11, 2021

Policymakers should recognize that corporate tax hikes will not only impact large firms, but many smaller and younger firms as well. Considering that many of these smaller firms are significant contributors to net job growth, raising corporate taxes at this time would not be conducive for a speedy economic recovery.

Treasury Rule on State Tax Cuts Limitation Raises New Questions

May 10, 2021

Today, the U.S. Treasury issued an interim final rule on the $350 billion in State and Local Fiscal Recovery Funds provided under the American Rescue Plan Act (ARPA). The proposed rule resolves several important questions but continues to involve the federal government in state finances at an extraordinary level.

Details and Analysis of Tax Proposals in President Biden’s American Families Plan

May 6, 2021

The Biden administration’s proposed American Families Plan would partially pay for about $1.8 trillion in new federal spending on education and family programs with about $661 billion in additional taxes on higher-income individuals and pass-through businesses like partnerships, sole proprietorships, and S corporations.

U.S. Top Combined Integrated Tax Rate on Corporate Income Would Become Highest in the OECD

May 3, 2021

Under President Biden’s tax plan, the United States would tax corporate income at the highest top rate in the industrialized world, averaging 65.1 percent.

Tax Policy in the First 100 Days of the Biden Administration

April 30, 2021

In his first 100 days as president, Joe Biden has proposed more than a dozen significant changes to the U.S. tax code that would raise upwards of $3 trillion in revenue and reduce incentives to invest, save, and work in the United States.

Biden’s Proposed Capital Gains Tax Rate Would be Highest for Many in a Century

April 26, 2021

The Biden administration is proposing to tax long-term capital gains at ordinary income rates for high earners, which will bring the top federal rate to highs not seen since the 1920s.

Top Combined Capital Gains Tax Rates Would Average 48 Percent Under Biden’s Tax Plan

April 23, 2021

The top federal rate on capital gains would be 43.4 percent under Biden's tax plan (when including the net investment income tax). Rates would be even higher in many U.S. states due to state and local capital gains taxes, leading to a combined average rate of over 48 percent compared to about 29 percent under current law.

Making the Expanded Child Tax Credit Permanent Would Cost Nearly $1.6 Trillion

March 19, 2021

As the Biden administration and Congress consider making the expanded child tax credit permanent, a nearly $1.6 trillion expansion of tax code-administered benefits, they should consider financing it in a way that doesn’t create significant headwinds to economic recovery.

The American Rescue Plan Act Greatly Expands Benefits through the Tax Code in 2021

March 12, 2021

The major tax-related benefits in the $1.9 trillion economic relief plan are a third round of direct payments, extended unemployment insurance (UI) benefits and a $10,200 unemployment insurance income exemption for 2020, and an expansion of the Child Tax Credit.

President Biden Outlines Plan for Additional Coronavirus-Related Relief and Stimulus

January 15, 2021

President Biden's plan builds on previous relief packages and would include larger payments to individuals, expanded relief for households and small businesses, funding for vaccine distribution, and aid to state and local governments.

Potential Regulatory Changes in Tax Policy Under the Biden Administration

November 24, 2020

President Biden may make greater use of regulatory changes to modify how tax law is interpreted and administered. There are several areas where a Biden Treasury Department, likely led by former Federal Reserve Chair Janet Yellen, may focus.

Biden Could Provide Business and Household Relief by Eliminating Trump Tariffs

November 16, 2020

Biden has not specified how he would approach the Trump tariffs, though his advisers have said he will at least review them.

Prospects for Federal Tax Policy After the 2020 Election

November 10, 2020

President Biden and Congress should concentrate on areas of common ground, finding incremental places to improve the tax code. A bipartisan bill recently introduced to help retirement savings is a good model for what incremental reform may look like.

Joe Biden’s 61 Percent Tax on Wealth

April 29, 2021

Biden may have rejected a Bernie Sanders-style wealth tax, but the President is proposing other ways of taxing wealth without explicitly labeling his policies a wealth tax—by as much as 61 percent.

Top Rates in Each State Under Joe Biden’s Tax Plan

October 20, 2020

President Joe Biden’s tax plan would yield combined top marginal state and local rates in excess of 60 percent in three states: California, Hawaii, and New Jersey (also New York City).

How Would Biden’s Tax Plan Change the Competitiveness of the U.S. Tax Code?

October 19, 2020

While the Biden campaign is certainly focused on increasing taxes on U.S. businesses and high-income earners, it is important that policymakers also understand what that reversal might do to U.S. competitiveness, and the competitive global environment in which U.S. companies and U.S. workers operate.

How Should Wealth and Work Be Treated in the Tax Code?

September 21, 2020

Joe Biden recently released a piece reviewing his tax proposals, contrasting them with President Donald Trump’s tax ideas. A major theme within this piece can be summarized in the title: “A Tale of Two Tax Policies: Trump Rewards Wealth, Biden Rewards Work.”

Placing Joe Biden’s Tax Increases in Historical Context

October 22, 2020

If we consider Biden’s tax plan over the entire budget window (2021 to 2030) as a percentage of GDP—1.30 percent—it would rank as the 6th largest tax increase since the 1940s and and one of the largest tax increases not associated with wartime funding.

Biden’s Proposal Would Shift the Distribution of Retirement Tax Benefits

August 26, 2020

One of Biden’s tax proposals that has gotten little attention is a change that would shift the benefits of tax deferral in traditional retirement accounts toward lower- and middle-income earners. The plan would reduce the tax benefit for those earning above $80,250 but under $400,000, violating Biden’s tax pledge to not raise taxes on earners below the $400,000 threshold.

Reviewing Joe Biden’s Tax Vision

August 20, 2020

Biden’s tax vision is twofold: higher taxes on high-income earners and businesses paired with more generous provisions for specific activities and households.

Details and Analysis of President Joe Biden’s Campaign Tax Plan

October 22, 2020

What has President Joe Biden proposed in terms of tax policy changes? Our experts provide the details and analyze the potential economic, revenue, and distributional impacts.

Unpacking Biden’s Tax Plan for Capital Gains

July 31, 2019

Corporate Tax Revenue Hit an All-Time High in 2021

October 12, 2021

This year’s robust corporate tax collections calls into question efforts by the administration and congressional Democrats to increase the corporate tax rate and raise other corporate taxes based on claims of relatively low tax collections following the Tax Cuts and Jobs Act (TCJA) in 2017.

Should Tax Policy Play a Role in Tobacco Harm Reduction?

October 8, 2021

In an effort to raise roughly $100 billion, the House proposal would double cigarette taxes and increase all other tobacco and nicotine taxes to comparable rates—a strategy with severe unintended consequences.

How Would the Ways and Means Proposal Affect Profit Shifting?

October 7, 2021

If Congress wants to reduce profit shifting, the proposal from the Ways and Means Committee is not an effective tool for this.

Testimony: Joint Economic Committee Hearing on the Revenue Provisions of the Build Back Better Act

October 6, 2021

Tax Foundation testimony at the Joint Economic Committee hearing on the revenue provisions in the Build Back Better Act and related analysis on their estimated impact.

Which Industries Would the Tax Hikes Target?

October 5, 2021

Using Tax Foundation’s Multinational Tax Model, we estimate the effective tax rates on controlled foreign corporation (CFC) profits under current law and under each of the proposed plans for business tax hikes.

Proposed Top Combined Marginal Capital Gains Tax Rate Would Be Third-Highest in OECD

October 4, 2021

Under the House Build Back Better Act (BBBA), the United States would tax capital gains at the third-highest top marginal rate among rich nations, averaging nearly 37 percent.

How Heavily Taxed Are U.S. Multinationals?

September 29, 2021

In general, the effective tax rates on the foreign profits of U.S. multinationals are not that low relative to the U.S. tax rate, contrary to popular rhetoric.

Carbon Tax: Weighing the Options for Financing Reconciliation

September 29, 2021

A carbon tax would be a less economically harmful pay-for than either personal or corporate income tax hikes and a more efficient way to reduce carbon emissions than green energy tax credits, but would come with other trade-offs.

U.S. Corporate Income Faces Third-Highest Integrated Tax Rate in OECD Under Ways and Means Plan

September 27, 2021

Under the House Ways and Means tax plan, the United States would tax corporate income at the third-highest integrated tax rate among rich nations, averaging 56.6 percent.

Latest White House Report Tells Incomplete Story on Average Tax Rates for Wealthy

September 24, 2021

The White House Council of Economic Advisors (CEA)'s recent report estimates the average federal individual income tax rate for the top 400 wealthiest households in the U.S to be 8.2 percent, lower than typically estimated for top earners.

Economy Loses More than Revenue Gains in Ways and Means “Build Back Better” Act

September 22, 2021

As Congress debates next steps on the tax provisions in the House Ways & Means Build Back Better Act, it is important to consider the economic impacts, which include reduced economic output, wages, and jobs. Due to the plan’s economically costly and inefficient tax increases, we find that long-run GDP would drop by more than $2 for every $1 in new tax revenue.

The Good, the Bad, and the Ugly of the Ways and Means Plan

September 20, 2021

The latest version of the Biden Build Back Better agenda, released last week by the House Ways and Means committee, is dense, with too many provisions to flesh out completely. Here’s a rundown of the good, the bad, and the ugly of it.

How Would House Dems’ Tax Plan Change Competitiveness of U.S. Tax Code?

September 17, 2021

The legislation put forward by Democratic members of the House of Representatives would reverse many of the 2017 reforms while increasing burdens on businesses and workers.

Tax Reform and Infrastructure Investment: The Two Theories

September 9, 2021

The Biden administration does have a point about how some components of the infrastructure bill could put downward pressure on inflation in the long term. However, the taxes chosen to pay for those investments would counteract those effects, by reducing investment and productivity growth.

Don’t Copy European Drug Pricing Policies that Reduced R&D and Innovation

September 9, 2021

Rather than pursuing policies that have demonstrably reduced R&D and innovation elsewhere, and that would disincentivize R&D in the U.S., lawmakers should continue to ensure an ecosystem that encourages risk-taking and R&D.

Reviewing Wyden’s Reconciliation Tax Policy Proposals

September 7, 2021

Congressional lawmakers are putting together a reconciliation bill to enact much of President Biden’s Build Back Better agenda. Many lawmakers including Senate Finance Committee Chair Ron Wyden (D-OR), however, want to make their own mark on the legislation.

Top Ten Congressional Districts Impacted by Biden Corporate Tax Proposals

September 7, 2021

The Biden corporate tax plan would disproportionately harm these congressional districts and make the U.S. less internationally competitive. These tax hikes, along with individual tax increases, would also raise taxes on net for 96 percent of congressional districts by 2031 after these temporary credits expire in 2025.

Tax Foundation Comments on the Wyden, Warner, Brown Discussion Draft

September 7, 2021

The proposed restructuring of the GILTI and FDII regimes makes several changes to the tax base that are largely offsetting, leaving virtually all the revenue potential to be determined by the tax rates on GILTI and FDII and the haircuts on foreign tax credits. Lawmakers should carefully weigh the trade-offs between higher tax revenues and competitiveness.

GILTI of Neglecting Losses

September 1, 2021

As lawmakers are reviewing international tax rules and determining what to change and update, they should pay attention to the way GILTI interacts with profitable and loss-making companies.

A Guide to the Fossil Fuel Provisions of the Biden Budget

September 2, 2021

5 Things to Consider in the Tax Gap Discussion

August 27, 2021

Increasing tax compliance is a major part of the Biden administration proposal to raise revenue for physical and social infrastructure. Reducing the tax gap—the difference between taxes owed and taxes paid—is a good way to raise revenue, but it doesn’t come without trade-offs, and it’s important to go about it in the right way.

Expense Allocation: A Hidden Tax on Domestic Activities and Foreign Profits

August 26, 2021

While arcane, expense allocation rules are relevant to current debates because they result in a heavier tax burden for U.S. companies under current law than the recently negotiated global minimum tax proposal.

Claiming 97 Percent of Small Businesses Exempt from Biden Taxes Is Misleading

August 20, 2021

The Biden administration recently cited an analysis from Treasury claiming that “the President’s agenda will protect 97 percent of small business owners from income tax rate increases.” However, the figure is misleading. To assess the economic effect of higher marginal tax rates, it matters how much income or investment will be affected—not how many taxpayers.

Considering Trade-offs to Improving Tax Collections

August 18, 2021

Recent Biden administration proposals rely heavily on revenue from better IRS tax collections to fund spending initiatives. The American Families Plan uses several avenues to reduce the tax gap (or the difference between taxes paid and taxes owed), from increasing the IRS's tax enforcement budget to improving information technology and expanding reporting requirements.

Adoption of Global Minimum Tax Could Raise U.S. Revenue…or Not

August 19, 2021

This interaction between the U.S. proposals and those that may be put into law in foreign jurisdictions should give lawmakers caution when evaluating the revenue potential of changes to GILTI.

How Biden’s Tax Plans Could Negatively Impact Housing

August 13, 2021

While President Biden has many proposals aimed at increasing the supply of affordable housing, including tax credits, his plans to raise business taxes could hinder that goal.

Tax Treatment of Nuclear Energy Should Be Simplified, Neutral, with Renewable Energy Sources

August 12, 2021

Tackling climate change and shifting the economy towards renewable energy has been a key part of the Biden administration’s agenda. However, this effort must first confront an overly complicated and non-neutral tax code, particularly in how it treats nuclear energy, for the White House to reach its ambitious goals.

Senator Warren’s Corporate Book Tax Is Wrong Way to Fund New Spending

August 11, 2021

The arguments for a new surtax on corporate book income misconstrues why there are differences between a corporation’s taxable income and book income.

Options for Reforming the Taxation of U.S. Multinationals

August 12, 2021

The Biden administration’s international tax proposals would impose a 7.7 percent surtax on the foreign profits of U.S. multinationals, resulting in a net increase in profit shifting out of the U.S.

Striking Right Balance for Cryptocurrency Reporting Requirements in Bipartisan Infrastructure Package

August 6, 2021

While it makes sense to ensure cryptocurrency transactions are treated similarly to other financial assets, the nature of these requirements as written are potentially unworkable.

Comparing Three Financing Options for President Biden’s Spending Proposals

August 3, 2021

While Congress continues to debate how to pay for President Biden’s spending proposals in the fiscal year 2022 budget, it is useful to consider the economic impact of a range of financing options in addition to the President’s proposed tax increases.

The Bipartisan Infrastructure Plan Avoids Tax Increases, Undermines User-Pay Principle, and Misses Chance to Modernize Obsolete Programs

July 30, 2021

The good news is that lawmakers avoided raising taxes to cover the cost of the new spending and instead used some reasonable fees and asset sales. The bad news is that half of the offsets come from unused, debt-financed COVID-19 relief funds and the economic return on many of these investments is questionable.

How Did We Ever Agree to Fund Infrastructure Investments?

July 28, 2021

As lawmakers explore funding mechanisms for additional federal infrastructure investment, they should focus on permanent, sustainable, and transparent revenue options that conform to the benefit principle. Permanent user fees, appropriately adjusted to restore and maintain their purchasing power, would serve as ideal revenue sources for federal infrastructure investments.

Simplifying the Tax Code and Reducing the Tax Gap: What Can Be Achieved?

July 28, 2021

Reducing the tax gap is, on the margin, a good way to raise revenue, but is not without costs. Policymakers should consider compliance costs for law-abiding taxpayers as well as administrative costs for the IRS when evaluating measures to reduce the tax gap.

Intellectual Property Came Back to U.S. after Tax Reform, but Proposals Could Change That

July 21, 2021

Intellectual property is a key driver in the current economy. Among other things, intellectual property includes patents for life-saving drugs and vaccines and software that runs applications on phones and computers.

Dynamic Scoring of Infrastructure Spending Proposals Offsets Small Portion of the Cost

July 20, 2021

While it is good that policymakers are taking the impact of the economy on tax revenue seriously, it is important to remember that the dynamic effect of increased spending would only offset a small portion of the total spending. In other words, new spending—like tax cuts—rarely pays for itself.

How Biden’s Business Tax Proposals Would Impact Taxpayers Across States

July 19, 2021

The Biden administration has targeted U.S. businesses, including corporations and passthrough entities, to raise revenue to fund new spending. However, individual taxpayers across America will end up footing the bill.

Biden Plan’s Higher Taxation of Businesses Would Boost Collections to Highest in 40-Plus Years

July 8, 2021

President Biden’s tax proposals released as part of his fiscal year 2022 budget would collect about $2 trillion in new tax revenue from businesses over 10 years. This new revenue would bring income tax collections on businesses as a portion of GDP to its highest level on a sustained basis in over 40 years.

Biden’s Tax Proposals Could Impact Small Businesses Over Time

July 7, 2021

The Biden administration has primarily focused on increasing taxes on top earners to generate revenue to fund its spending priorities. However, these proposals would hit many pass-through businesses and much of pass-through business income, including small businesses, family-owned businesses, and farms.

The Impact of the Biden Administration’s Tax Proposals by State and Congressional District

June 30, 2021

The redistribution of income from the Biden administration's tax proposals would involve many winners and losers, not only across different types of taxpayers but also geographically across the country. Launch our new interactive map to see average tax changes by state and congressional district over the budget window from 2022 to 2031. 

Eight Ways to Compare the Biden Proposals to the Global Minimum Tax

June 21, 2021

While President Biden has led a renewed effort on global negotiations over minimum taxation, his own proposals for U.S. companies differ significantly from proposals that had previously been discussed at the international level. In fact, if other countries implement a policy as was outlined last year, then Biden’s proposal would be a significantly more burdensome policy for U.S. businesses than what other countries might adopt.

Expensing Is Infrastructure, Too

June 15, 2021

The Biden administration has suggested several tax increases for his infrastructure plan. Public infrastructure can help increase economic growth, but by raising taxes on private investment, the net effect on growth may be negative. However, tax options like retaining expensing for private R&D investment or making 100 percent bonus depreciation for equipment permanent would be complementary to the goals of infrastructure spending.

Details and Analysis of President Biden’s FY 2022 Budget Proposals

June 16, 2021

When combining the economic impact of President Biden's tax proposals with the benefit of infrastructure spending, we estimate that long-run GDP would decrease by 0.9 percent and American incomes would fall by an average of 1 percent, resulting in 165,000 fewer American jobs.

Tracking the 2021 Biden Tax Plan and Federal Tax Proposals

June 16, 2021

Taxes are once again at the forefront of the public policy debate as legislators grapple with how to fund new infrastructure spending, among other priorities. Our tax tracker helps you stay up-to-date as new tax plans emerge from the Biden administration and Congress.

Who Bears the Burden of Corporation Taxation? A Review of Recent Evidence

June 10, 2021

The Biden administration has pledged to not raise taxes on anyone earning less than $400,000 a year. However, the administration’s corporate tax proposals would likely violate that pledge, given that corporations are comprised of people who also might earn less than $400,000.

Combined Effect of a Higher Corporate Rate and Permanent Bonus Depreciation

June 15, 2021

The negative effects of President Biden’s proposed 28 percent corporate income tax rate could be tempered by improving how the corporate income tax base treats investment expenses.

Infrastructure Funding for Highways Digs into Issues of Outdated Taxes and Narrow Bases

June 10, 2021

As spending priorities are dividing lawmakers trying to negotiate among the various federal infrastructure plans, less time is being spent on the funding of one of the key components—our highways, both current and future taxes and fees. One of the current taxes, a federal excise tax on heavy commercial vehicles and trailers, is an important revenue generator, but its flawed tax design has a negative impact on investment and leads to unstable revenue.

Repealing Tariffs Would Be a Simple Option to Boost U.S. Economic Growth

June 1, 2021

Of the many tax policies modeled in our new Options for Reforming America’s Tax Code 2.0, repealing the tariffs imposed under President Trump’s administration would be one of the simplest ways policymakers could boost economic growth.

Biden Administration Changes to GILTI and FDII Will Yield Automatic State Tax Increases

May 25, 2021

State taxation of GILTI is unconventional and economically uncompetitive and will become even more so if the federal government adopts a more aggressive approach to taxing GILTI, as outlined in the American Jobs Plan Act.

Reviewing Recent Evidence of the Effect of Taxes on Economic Growth

May 21, 2021

With the Biden administration proposing a variety of new taxes, it is worth revisiting the literature on how taxes, particularly on corporate and individual income, can impact economic growth.

How Biden’s Corporate Tax Increases Could Make Tax Enforcement Harder

May 18, 2021

If Biden wants to reduce tax evasion, raising the corporate rate, increasing the incentives to engage in tax evasion, and creating a larger tax advantage to becoming a pass-through business is counterproductive.

Financing Infrastructure Spending with Corporate Tax Increases Would Stunt Economic Growth

May 14, 2021

The Biden administration’s American Jobs Plan proposal to fund infrastructure spending relies on a bet that the benefits outweigh the costs of a higher corporate tax burden. Using the Tax Foundation model, we find that this trade-off is a bad one for the U.S. economy, resulting in reduced GDP, less capital investment, fewer jobs, and lower wages.

Many Small Businesses Could Be Impacted by Biden Corporate Tax Proposals

May 11, 2021

Policymakers should recognize that corporate tax hikes will not only impact large firms, but many smaller and younger firms as well. Considering that many of these smaller firms are significant contributors to net job growth, raising corporate taxes at this time would not be conducive for a speedy economic recovery.

Treasury Rule on State Tax Cuts Limitation Raises New Questions

May 10, 2021

Today, the U.S. Treasury issued an interim final rule on the $350 billion in State and Local Fiscal Recovery Funds provided under the American Rescue Plan Act (ARPA). The proposed rule resolves several important questions but continues to involve the federal government in state finances at an extraordinary level.

25 Percent Corporate Income Tax Rate Would Make U.S. Above Average Compared to Peers

May 4, 2021

Some lawmakers have expressed concerns about President Biden’s proposal to raise the federal corporate income tax rate from 21 percent to 28 percent, and instead suggest raising the rate to 25 percent.

U.S. Top Combined Integrated Tax Rate on Corporate Income Would Become Highest in the OECD

May 3, 2021

Under President Biden’s tax plan, the United States would tax corporate income at the highest top rate in the industrialized world, averaging 65.1 percent.

Tax Policy in the First 100 Days of the Biden Administration

April 30, 2021

In his first 100 days as president, Joe Biden has proposed more than a dozen significant changes to the U.S. tax code that would raise upwards of $3 trillion in revenue and reduce incentives to invest, save, and work in the United States.

Effects of Proposed International Tax Changes on U.S. Multinationals

April 28, 2021

The international corporate tax changes in President Biden’s tax plan would increase tax rates on domestic income more than on foreign income, resulting in a net increase in profit shifting out of the US, according to our Multinational Tax Model.

Testimony: Tax Fairness, Economic Growth, and Funding Government Investments

April 27, 2021

Economic research and Tax Foundation modeling indicate there is a negative trade-off between progressive taxes on capital income—such as the wealth tax, minimum book tax on corporate income, and a higher corporate tax rate—and economic growth.

Corporate Investment Outweighs Federal Revenue Losses Since TCJA

April 22, 2021

The Biden administration has argued for raising the corporate tax rate to offset the drop in federal corporate revenues following the Tax Cuts and Jobs Act (TCJA) of 2017, claiming it did not lead to more corporate investment as advertised. Although corporate revenues did drop following this tax reform, the ensuing increase in corporate investment far exceeds these revenue losses.

Raising the Corporate Rate to 28 Percent Reduces GDP by $720 Billion Over Ten Years

April 21, 2021

The Options guide presents the economic effects we estimate would occur in the long term, or 20 to 30 years from now, but we can also use our model to show the cumulative effects of the policy change—providing more context, for instance, about how the effects of a higher corporate income tax rate compound over time, which we estimate would reduce GDP by a cumulative $720 billion over the next 10 years.

Business Tax Collections Within Historical Norm After Accounting for Pass-through Business Taxes

April 15, 2021

A common argument for raising the corporate income tax rate is that collections as a share of gross domestic product (GDP) fell after the rate was reduced to 21 percent as part of the Tax Cuts and Jobs Act (TCJA) in 2017. But that argument is incomplete, as the U.S. also has a large pass-through business sector where taxes are collected through the individual income tax system.

Labor Share of Net Income is Within Its Historical Range

April 13, 2021

President Biden’s administration argues in the Made in America Tax Plan that corporate taxes should be raised to address a declining share of national income accruing to labor. The problem with the argument, which primarily relies on measures of gross domestic income, is it ignores that some income doesn’t accrue to workers or capital owners.

Biden’s Corporate Minimum Book Tax Narrows, but Problems and Uncertainties Remain

April 13, 2021

The corporate tax base should be reformed directly, rather than piecemeal through a complicated and burdensome separate tax applicable to a small number of companies.

U.S. Effective Corporate Tax Rate Is Right in Line With Its OECD Peers

April 2, 2021

Whether we use corporate tax collections as a portion of GDP, average effective tax rates, or marginal tax rates, each measure shows that the U.S. effective corporate tax burden is close to or above the average compared to its OECD peers. Raising corporate income taxes would put the U.S. at a competitive disadvantage, whether one looks at statutory tax rates or effective corporate tax rates.

Combined Corporate Rates Would Exceed 30 Percent in Most States Under Biden’s Tax Plan

April 1, 2021

While the focus has been on the federal rate, it is important to include state tax rates when thinking about the total tax burden on corporate income.

CBO Study: Benefits of Biden’s $2 Trillion Infrastructure Plan Won’t Outweigh $2 Trillion Tax Hike

March 31, 2021

The economics is clear: If Biden wants to maximize the economic benefits of his $3 trillion in new infrastructure spending, he should cut $3 trillion in other government spending to pay for it.

The American Rescue Plan Act Greatly Expands Benefits through the Tax Code in 2021

March 12, 2021

The major tax-related benefits in the $1.9 trillion economic relief plan are a third round of direct payments, extended unemployment insurance (UI) benefits and a $10,200 unemployment insurance income exemption for 2020, and an expansion of the Child Tax Credit.

Phasing in a Corporate Rate Hike Would Be the Worst of Both Worlds

March 9, 2021

The Biden administration has signaled its openness to raising the corporate tax rate, potentially by phasing in an increase over several years. While phasing in a tax increase, as opposed to hiking immediately, may seem like a reasonable middle ground, it would be the worst of both worlds because it provides old investment with a lower rate while penalizing new investment.

Evaluating Proposals to Increase the Corporate Tax Rate and Levy a Minimum Tax on Corporate Book Income

February 24, 2021

President Biden and congressional policymakers have proposed several changes to the corporate income tax, including raising the rate from 21 percent to 28 percent and imposing a 15 percent minimum tax on the book income of large corporations, to raise revenue for new spending programs. Our new modeling analyzes the economic, revenue, and distributional impact of these proposals.

5 Observations on Janet Yellen’s Recent Confirmation Testimony

January 22, 2021

In her recent confirmation hearing, economist Janet Yellen, President Biden’s choice for Treasury Secretary, sought to reassure markets that the new administration would not raise corporate taxes until the economy improves. At the same time, however, she sent a troubling signal that when they do push for higher corporate tax rates, they would do so in coordination with other countries so that the U.S. doesn’t lose its competitive edge.

President Biden Outlines Plan for Additional Coronavirus-Related Relief and Stimulus

January 15, 2021

President Biden's plan builds on previous relief packages and would include larger payments to individuals, expanded relief for households and small businesses, funding for vaccine distribution, and aid to state and local governments.

Potential Regulatory Changes in Tax Policy Under the Biden Administration

November 24, 2020

President Biden may make greater use of regulatory changes to modify how tax law is interpreted and administered. There are several areas where a Biden Treasury Department, likely led by former Federal Reserve Chair Janet Yellen, may focus.

Biden Could Provide Business and Household Relief by Eliminating Trump Tariffs

November 16, 2020

Biden has not specified how he would approach the Trump tariffs, though his advisers have said he will at least review them.

Prospects for Federal Tax Policy After the 2020 Election

November 10, 2020

President Biden and Congress should concentrate on areas of common ground, finding incremental places to improve the tax code. A bipartisan bill recently introduced to help retirement savings is a good model for what incremental reform may look like.

Top Rates in Each State Under Joe Biden’s Tax Plan

October 20, 2020

President Joe Biden’s tax plan would yield combined top marginal state and local rates in excess of 60 percent in three states: California, Hawaii, and New Jersey (also New York City).

How Would Biden’s Tax Plan Change the Competitiveness of the U.S. Tax Code?

October 19, 2020

While the Biden campaign is certainly focused on increasing taxes on U.S. businesses and high-income earners, it is important that policymakers also understand what that reversal might do to U.S. competitiveness, and the competitive global environment in which U.S. companies and U.S. workers operate.

How Should Wealth and Work Be Treated in the Tax Code?

September 21, 2020

Joe Biden recently released a piece reviewing his tax proposals, contrasting them with President Donald Trump’s tax ideas. A major theme within this piece can be summarized in the title: “A Tale of Two Tax Policies: Trump Rewards Wealth, Biden Rewards Work.”

Biden’s Plan to Address Offshoring Comes with Contradictions

September 9, 2020

If the goal of the Biden campaign is to bring new investment and jobs to the U.S., it is doubtful that these new tax rules will contribute to that goal.

Placing Joe Biden’s Tax Increases in Historical Context

October 22, 2020

If we consider Biden’s tax plan over the entire budget window (2021 to 2030) as a percentage of GDP—1.30 percent—it would rank as the 6th largest tax increase since the 1940s and and one of the largest tax increases not associated with wartime funding.

Reviewing Joe Biden’s Tax Vision

August 20, 2020

Biden’s tax vision is twofold: higher taxes on high-income earners and businesses paired with more generous provisions for specific activities and households.

Biden’s Plan to Boost Research and Development Should Include Cancellation of Upcoming R&D Amortization

July 13, 2020

As concern over American competitiveness and onshoring of innovative activity increases, presidential candidates and policymakers should keep in mind the tax increases scheduled to take effect in the coming years, including the amortization of R&D and phaseout of the broader expensing provisions.

Details and Analysis of President Joe Biden’s Campaign Tax Plan

October 22, 2020

What has President Joe Biden proposed in terms of tax policy changes? Our experts provide the details and analyze the potential economic, revenue, and distributional impacts.

Biden’s Minimum Book Income Tax Proposal Would Create Needless Complexity

December 13, 2019

Anti-Base Erosion Provisions and Territorial Tax Systems in OECD Countries

May 2, 2019

The U.S. decision to adopt a territorial tax system is certainly an improvement over having a worldwide system. However, in moving to a territorial system some of the new features created with the TCJA increased the complexity of the system.

How Would the Ways and Means Proposal Affect Profit Shifting?

October 7, 2021

If Congress wants to reduce profit shifting, the proposal from the Ways and Means Committee is not an effective tool for this.

Testimony: Joint Economic Committee Hearing on the Revenue Provisions of the Build Back Better Act

October 6, 2021

Tax Foundation testimony at the Joint Economic Committee hearing on the revenue provisions in the Build Back Better Act and related analysis on their estimated impact.

Which Industries Would the Tax Hikes Target?

October 5, 2021

Using Tax Foundation’s Multinational Tax Model, we estimate the effective tax rates on controlled foreign corporation (CFC) profits under current law and under each of the proposed plans for business tax hikes.

How Heavily Taxed Are U.S. Multinationals?

September 29, 2021

In general, the effective tax rates on the foreign profits of U.S. multinationals are not that low relative to the U.S. tax rate, contrary to popular rhetoric.

Choose Your Own Adventure: Global Minimum Tax Edition

September 27, 2021

Over the course of the last year, it has become clear that Democratic lawmakers want to change U.S. international tax rules. However, as proposals have surfaced in recent weeks, there are clear divides among various proposals.

Economy Loses More than Revenue Gains in Ways and Means “Build Back Better” Act

September 22, 2021

As Congress debates next steps on the tax provisions in the House Ways & Means Build Back Better Act, it is important to consider the economic impacts, which include reduced economic output, wages, and jobs. Due to the plan’s economically costly and inefficient tax increases, we find that long-run GDP would drop by more than $2 for every $1 in new tax revenue.

The Good, the Bad, and the Ugly of the Ways and Means Plan

September 20, 2021

The latest version of the Biden Build Back Better agenda, released last week by the House Ways and Means committee, is dense, with too many provisions to flesh out completely. Here’s a rundown of the good, the bad, and the ugly of it.

How Would House Dems’ Tax Plan Change Competitiveness of U.S. Tax Code?

September 17, 2021

The legislation put forward by Democratic members of the House of Representatives would reverse many of the 2017 reforms while increasing burdens on businesses and workers.

Treasury Minimum Tax Argument Relies on Narrow Interpretation of Current/Proposed Rules

September 8, 2021

As Congress prepares to rewrite some portion of the current international tax rules, it’s hoped that they are able to achieve a more principled approach and one that is not so subject to obfuscation and misinterpretation.

Reviewing Wyden’s Reconciliation Tax Policy Proposals

September 7, 2021

Congressional lawmakers are putting together a reconciliation bill to enact much of President Biden’s Build Back Better agenda. Many lawmakers including Senate Finance Committee Chair Ron Wyden (D-OR), however, want to make their own mark on the legislation.

Top Ten Congressional Districts Impacted by Biden Corporate Tax Proposals

September 7, 2021

The Biden corporate tax plan would disproportionately harm these congressional districts and make the U.S. less internationally competitive. These tax hikes, along with individual tax increases, would also raise taxes on net for 96 percent of congressional districts by 2031 after these temporary credits expire in 2025.

Tax Foundation Comments on the Wyden, Warner, Brown Discussion Draft

September 7, 2021

The proposed restructuring of the GILTI and FDII regimes makes several changes to the tax base that are largely offsetting, leaving virtually all the revenue potential to be determined by the tax rates on GILTI and FDII and the haircuts on foreign tax credits. Lawmakers should carefully weigh the trade-offs between higher tax revenues and competitiveness.

GILTI of Neglecting Losses

September 1, 2021

As lawmakers are reviewing international tax rules and determining what to change and update, they should pay attention to the way GILTI interacts with profitable and loss-making companies.

Expense Allocation: A Hidden Tax on Domestic Activities and Foreign Profits

August 26, 2021

While arcane, expense allocation rules are relevant to current debates because they result in a heavier tax burden for U.S. companies under current law than the recently negotiated global minimum tax proposal.

International Tax Proposals and Profit Shifting

August 24, 2021

There are many ways the U.S.’s international tax rules could be changed, reformed, improved, or worsened. Reflexively jacking up taxes on U.S. multinationals does not necessarily accomplish the goal of reducing or eliminating profit shifting, and it would in fact worsen it.

Adoption of Global Minimum Tax Could Raise U.S. Revenue…or Not

August 19, 2021

This interaction between the U.S. proposals and those that may be put into law in foreign jurisdictions should give lawmakers caution when evaluating the revenue potential of changes to GILTI.

Four Revenue Scores on Options to Change U.S. International Tax Rules

August 17, 2021

Changes to international tax rules are likely on the way, and it is therefore important for lawmakers to understand how various reform options would impact U.S. tax burdens on multinational companies. Moreover, policymakers should also recognize the need for prudent policies that do not put U.S.-based multinationals at a competitive disadvantage or severely curtail investment and hiring.

Will FDII Stay or Will it Go?

August 10, 2021

While the Biden administration has certainly proposed to remove FDII, it is not clear that Congress is on board with that approach.

Options for Reforming the Taxation of U.S. Multinationals

August 12, 2021

The Biden administration’s international tax proposals would impose a 7.7 percent surtax on the foreign profits of U.S. multinationals, resulting in a net increase in profit shifting out of the U.S.

Intellectual Property Came Back to U.S. after Tax Reform, but Proposals Could Change That

July 21, 2021

Intellectual property is a key driver in the current economy. Among other things, intellectual property includes patents for life-saving drugs and vaccines and software that runs applications on phones and computers.

How Biden’s Business Tax Proposals Would Impact Taxpayers Across States

July 19, 2021

The Biden administration has targeted U.S. businesses, including corporations and passthrough entities, to raise revenue to fund new spending. However, individual taxpayers across America will end up footing the bill.

Piling on the GILTI Verdicts

July 15, 2021

The Biden administration has proposed to significantly increase the tax burden on foreign income through a policy known as Global Intangible Low-Tax Income (GILTI). While the administration’s rhetoric focuses on doubling the tax rate on GILTI from 10.5 percent to 21 percent, this is less than half the story.

What’s in the New Global Tax Agreement?

October 8, 2021

If the global tax agreement is fully implemented, large U.S. companies would pay less to the U.S. government and more to overseas governments while the foreign earnings of companies would face higher taxes.

The Impact of the Biden Administration’s Tax Proposals by State and Congressional District

June 30, 2021

The redistribution of income from the Biden administration's tax proposals would involve many winners and losers, not only across different types of taxpayers but also geographically across the country. Launch our new interactive map to see average tax changes by state and congressional district over the budget window from 2022 to 2031. 

Eight Ways to Compare the Biden Proposals to the Global Minimum Tax

June 21, 2021

While President Biden has led a renewed effort on global negotiations over minimum taxation, his own proposals for U.S. companies differ significantly from proposals that had previously been discussed at the international level. In fact, if other countries implement a policy as was outlined last year, then Biden’s proposal would be a significantly more burdensome policy for U.S. businesses than what other countries might adopt.

Two Important Issues that Must Be Resolved in “Global Tax Reform”

May 25, 2021

If the U.S. is suggesting a 15 percent effective rate as the minimum acceptable rate for a global agreement, then the tax bases of the various minimum taxes adopted as part of the agreement should be aligned to minimize complexities and unintended consequences.

Biden Administration Changes to GILTI and FDII Will Yield Automatic State Tax Increases

May 25, 2021

State taxation of GILTI is unconventional and economically uncompetitive and will become even more so if the federal government adopts a more aggressive approach to taxing GILTI, as outlined in the American Jobs Plan Act.

GILTI by Country Is Not as Simple as it Seems

May 18, 2021

If policymakers want a recipe to dramatically expand the complexity of U.S. international tax rules and the burden on U.S. multinational businesses, then a tax on foreign earnings calculated at the country level would be the way to do it. Alternatively, policymakers could focus on mitigating the unintended consequences of GILTI and other recent international tax rules.

Tax Policy in the First 100 Days of the Biden Administration

April 30, 2021

In his first 100 days as president, Joe Biden has proposed more than a dozen significant changes to the U.S. tax code that would raise upwards of $3 trillion in revenue and reduce incentives to invest, save, and work in the United States.

Effects of Proposed International Tax Changes on U.S. Multinationals

April 28, 2021

The international corporate tax changes in President Biden’s tax plan would increase tax rates on domestic income more than on foreign income, resulting in a net increase in profit shifting out of the US, according to our Multinational Tax Model.

Treasury’s Latest Pillar 1 Proposal: A Strategy to Split the Riches or Give Away the Store?

April 14, 2021

New international tax rules on super-profits would disproportionately impact U.S. companies however they are designed. The question that Treasury should answer is why limit the policy in such a way that magnifies that disproportionate application and the risk to the U.S. tax base.

Biden’s Tax Plan Would Restore U.S. Exceptionalism—But Not in a Good Way

April 9, 2021

No other country has tried to enforce some of the policies that the Biden administration is proposing. Embarking on such uncharted course would set the U.S. apart from global tax policy norms and best practices and could harm American competitiveness.

The Balancing Act of GILTI and FDII

April 7, 2021

The tax treatment of intangible assets has come into the spotlight recently with the Biden administration proposing to undo a policy adopted in 2017 to encourage intellectual property (IP) to be located in the U.S.

U.S. Effective Corporate Tax Rate Is Right in Line With Its OECD Peers

April 2, 2021

Whether we use corporate tax collections as a portion of GDP, average effective tax rates, or marginal tax rates, each measure shows that the U.S. effective corporate tax burden is close to or above the average compared to its OECD peers. Raising corporate income taxes would put the U.S. at a competitive disadvantage, whether one looks at statutory tax rates or effective corporate tax rates.

TCJA Is Not GILTI of Offshoring

March 18, 2021

Many members of Congress have taken issue with the 2017 tax reform. However, the reasoning that has led some to believe that GILTI provides a path to offshoring investment and jobs is flawed.

How GILTI Are U.S. Industries?

March 16, 2021

Both the Biden campaign and some Democratic members of Congress have recommended changes to GILTI, but before doing that, policymakers should consider how GILTI’s design can have ramifications for many U.S. companies and their tax burdens.

Can GILTI and the GloBE be Harmonized in a Biden Administration?

March 4, 2021

While there are several parts of the policy that are subject to further discussion and agreement, GloBE is expected to be different from GILTI in several ways.

U.S. Cross-border Tax Reform and the Cautionary Tale of GILTI

February 17, 2021

The Biden campaign and Senate Democrats identified changes to GILTI that would increase the taxes U.S. companies pay on their foreign earnings. Rather than tacking on changes to a system that is currently neither fully territorial nor worldwide, policymakers should evaluate the structure of the current system with a goal of it becoming more, not less, coherent.

5 Observations on Janet Yellen’s Recent Confirmation Testimony

January 22, 2021

In her recent confirmation hearing, economist Janet Yellen, President Biden’s choice for Treasury Secretary, sought to reassure markets that the new administration would not raise corporate taxes until the economy improves. At the same time, however, she sent a troubling signal that when they do push for higher corporate tax rates, they would do so in coordination with other countries so that the U.S. doesn’t lose its competitive edge.

How Would Biden’s Tax Plan Change the Competitiveness of the U.S. Tax Code?

October 19, 2020

While the Biden campaign is certainly focused on increasing taxes on U.S. businesses and high-income earners, it is important that policymakers also understand what that reversal might do to U.S. competitiveness, and the competitive global environment in which U.S. companies and U.S. workers operate.

Biden’s Plan to Address Offshoring Comes with Contradictions

September 9, 2020

If the goal of the Biden campaign is to bring new investment and jobs to the U.S., it is doubtful that these new tax rules will contribute to that goal.

Reviewing Joe Biden’s Tax Vision

August 20, 2020

Biden’s tax vision is twofold: higher taxes on high-income earners and businesses paired with more generous provisions for specific activities and households.

Details and Analysis of President Joe Biden’s Campaign Tax Plan

October 22, 2020

What has President Joe Biden proposed in terms of tax policy changes? Our experts provide the details and analyze the potential economic, revenue, and distributional impacts.

Anti-Base Erosion Provisions and Territorial Tax Systems in OECD Countries

May 2, 2019

The U.S. decision to adopt a territorial tax system is certainly an improvement over having a worldwide system. However, in moving to a territorial system some of the new features created with the TCJA increased the complexity of the system.