Individual income taxes are a major source of state government revenue, accounting for 37 percent of state tax collections in fiscal year (FY) 2017. Several states had notable individual income tax changes in 2020: Arizona, Arkansas, Massachusetts, Michigan, Minnesota, North Carolina, Ohio, Tennessee, Virginia, and Wisconsin.
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The coronavirus relief legislation passed out of the House Ways and Means Committee would significantly expand the child tax credit for 2021, from its current $2,000 maximum to a fully refundable $3,600 for children 6 and under and $3,000 for children over 6.
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Sen. Mitt Romney’s Family Security Act would replace the Child Tax Credit with a monthly child allowance administered by the Social Security Administration, making the benefit more generous and accessible to low-income households without earned income.
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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.
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The Tax Foundation’s “State Tax Policy Boot Camp,” is ideal for anyone interested in gaining a better understanding of state taxation.
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Despite declining corporate income tax rates over the last 30 years in Europe (and other parts of the world), average revenue from corporate income taxes as a share of total tax revenue has not changed significantly compared to 1990.
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Developed countries have on average become more reliant on consumption taxes and less reliant on individual income taxes. These policy changes matter, considering that consumption-based taxes raise revenue with less distortionary effects than taxes on income.
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As the House Ways and Means Committee continues working on the latest round of fiscal relief amid the pandemic, one curious provision in the legislation is a tax hike on multinational companies. One section of the legislation would repeal a provision in current law that allows U.S. multinationals to choose to allocate their interest costs on a worldwide basis (more on that in a moment).
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Sources of state revenue have come under closer scrutiny in light of the impact of the coronavirus pandemic, as different tax types have differing volatility and economic impact—although even beyond these unique circumstances, it is important for policymakers to understand the trade-offs associated with different sources of tax revenue.
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