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Evaluating U.S. Tax Reform Options & Trade-Offs

The economic crisis caused by the coronavirus pandemic poses a triple challenge for tax policy in the United States. Lawmakers are tasked with crafting a policy response that will accelerate the economic recovery, reduce the mounting deficit, and protect the most vulnerable.

To assist lawmakers in navigating the challenge, and to help the American public understand the tax changes being proposed, the Tax Foundation’s Center for Federal Tax Policy modeled how 70 potential changes to the tax code would affect the U.S. economy, distribution of the tax burden, and federal revenue.

In tax policy there is an ever-present trade-off among how much revenue a tax will raise, who bears the burden of a tax, and what impact a tax will have on economic growth. Armed with the information in our new book, Options for Reforming America’s Tax Code 2.0, policymakers can debate the relative merits and trade-offs of each option to improve the tax code in a post-pandemic world.

 

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Missouri’s Tax Competitiveness

While Missouri has room for improvement, the state is making waves, positioning itself as an increasingly attractive location for business investment. And as ongoing reforms further enhance the competitiveness of the state’s tax code, more businesses will take notice.

8 min read
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A Regulatory Tax Hike on U.S. Multinationals

While much of the policy focus has been on proposals embedded in the Build Back Better agenda, a meaningful tax hike for multinational companies has already been adopted.

1 min read
Federal Menthol Cigarette Ban Will Cost States Millions. State Cigarette Revenue Impact Due to Federal Cigarette Ban

Federal Menthol Cigarette Ban May Cost Governments $6.6 Billion

The FDA’s expected announcement of a national ban on menthol-flavored cigarettes and cigars with a characterizing flavor would carry significant revenue implications for both the federal government and state governments, with likely limited benefits in smoking cessation.

6 min read
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The Global Minimum Tax Changes the Game for Build Back Better Revenue

One goal for the Build Back Better Act has been to increase the amount of revenue the U.S. raises from U.S. companies at home or abroad. With the global minimum tax rules in play, it is likely that the expected gains to the U.S. Treasury from foreign profits of U.S. companies will diminish.

5 min read
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Rushing Headlong into Formulary Apportionment

Complex tax policies that work well “in theory” can often have a hard time when the rubber meets the road. One instance of this is the challenge that the OECD has created for itself with the global tax deal, also fondly known as Pillar 1 and Pillar 2.

7 min read
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Federal Gas Tax Holiday? Suspending the Gas Tax Is a Mistake

If policymakers are looking to change the tax code to help fight inflation, they should pump the brakes on the federal gas tax holiday and instead consider structural reforms to raise the economy’s productive capacity in the long term.

4 min read