To alleviate the regressive impact on wireless consumers, states should examine their existing communications tax structures and consider policies that transition their tax systems away from narrowly based wireless taxes and toward broad-based tax sources.
The differences in purchasing power can be large and they have significant implications for the relative impact of economic and tax policies across the United States.
The state EV taxation landscape reflects the evolving transportation sector and the pressing need to address both fiscal gaps in road funding and environmental concerns.
Any move to repeal the cap or enhance the deduction would disproportionately benefit higher earners, making the tax code more regressive.
In tax year 2020, taxpayers claimed more than 159 million tax credits on their individual income tax returns worth a total of more than $277 billion. That was an increase of $35.3 billion from tax year 2019, largely due to an influx of pandemic relief administered through the tax code in 2020.
Reviewing reported income helps to understand the composition of the federal government’s revenue base and how Americans earn their taxable income. The individual income tax, the federal government’s largest source of revenue, is largely a tax on labor.
In the United States, tobacco is taxed at both the federal and state and sometimes even local levels. These layers of taxes often result in very high levels of taxation—the highest of any consumer item. The retail price of cigarettes, for instance, is more than 40 percent taxes on average. In some states, like Minnesota and New York, more than 50 percent of the price paid by consumers comes from taxes.
Although the U.S. has a progressive tax system and a relatively low tax burden compared to the OECD average, average-wage workers still pay more than 30 percent of their wages in taxes.
Different taxes have different economic effects, so policymakers should always consider how tax revenue is raised and not just how much is raised.
The latest IRS data shows that the U.S. federal individual income tax continued to be progressive, borne primarily by the highest income earners.