Canada’s Tax-Free Savings Accounts Are a Huge Success. U.S. Lawmakers Should Take Note
For most Americans, saving is a taxing experience. Our neighbors to the north have found a better solution—and U.S. lawmakers should take note.
5 min readThe United States has long been a forward-thinking country that builds for tomorrow through saving, investment, and entrepreneurship. Saving gives us security, investment gives us rising incomes through enhanced productivity, and entrepreneurship drives economic growth and dynamism, creating new opportunities.
However, over the last fifty years, all three have been eroded. Citizens aren’t saving enough, businesses aren’t investing enough, and the country is undergoing a retreat in the level of economic growth and dynamism.
As it is, the U.S. tax code places substantial burdens on each of these essential factors of our economy. What’s worse, while other nations have become more attractive, there has been a proliferation of proposals in the U.S. that would only cause further harm—wealth taxes, “mark-to-market” capital gains taxes, estate taxes, and financial transaction taxes.
Below, we offer in-depth analysis of these and other proposals, which highlight a harmful trend in tax policy. Americans are industrious, entrepreneurial, and innovative. Policymakers should ensure we have a tax code that enhances those qualities, not hinders them.
For most Americans, saving is a taxing experience. Our neighbors to the north have found a better solution—and U.S. lawmakers should take note.
5 min readAmericans are saving less. While the U.S. saving rate has regularly lagged behind its peers, it has yet to return to pre-pandemic levels. Increasingly, people are turning to credit cards to fill the gaps in their budgets.
The uncertain future of American finances in a time of potential economic instability points to the need for tax reforms that encourage individuals to save and build financial security in a relatively simple way, such as through universal savings accounts.
6 min readWhat 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.
23 min readNew modeling finds that the wealth taxes proposed by Sen. Warren and Sen. Sanders would raise significantly less revenue than promised, face serious administrative and compliance challenges, and would increase foreign ownership of U.S. capital.
38 min readA key element of America’s dynamism problem is a drop in entrepreneurship. Removing tax barriers for entrepreneurs would improve America’s dynamism while making America’s tax code more neutral, efficient, and simple for all taxpayers.
25 min readCapital gains taxes create a burden on saving because they are an additional layer of taxes on a given dollar of income. The capital gains tax rate cannot be directly compared to individual income tax rates, because the additional layers of tax that apply to capital gains income must also be part of the discussion.
14 min readThe success of any mark-to-market system lies in its ability to accurately value tangible and non-tangible (or non-tradable) assets such as intellectual property and brand-value recognition. Administrative regulations, guidance, and enforcement are the Achilles’ heel of any plan to annually tax accrued gains.
17 min readPolicymakers should exercise caution in deciding whether to enact an FTT given the uncertainty regarding the FTT’s ability to raise revenue and the significant damage it could cause to the U.S. financial system
39 min readPolicymakers should exercise caution in deciding whether to enact an FTT given the uncertainty regarding the FTT’s ability to raise revenue and the significant damage it could cause to the U.S. financial system
39 min readWhen considering options to eliminate the deferral advantage of capital gains taxation, a lookback charge provides a reasonable solution for taxing hard-to-value assets. However, policymakers need to understand the limitations of a lookback charge compared to both mark-to-market taxation and the current system.
16 min readThe “Real Deal” would increase the tax burden on saving, investing, and working in the United States, and reduce the global competitiveness of the U.S. economy.
3 min readThe success of any mark-to-market system lies in its ability to accurately value tangible and non-tangible (or non-tradable) assets such as intellectual property and brand-value recognition. Administrative regulations, guidance, and enforcement are the Achilles’ heel of any plan to annually tax accrued gains.
17 min readA low wealth tax rate is equivalent to a high-rate income tax. The interaction between wealth taxes and the existing income taxes must be considered when analyzing a wealth tax plan.
6 min readBiden, Sanders, and Warren have staked out similar plans to increase capital gains taxes on the wealthiest Americans. While all three candidates have called for taxing capital gains at ordinary income rates, the phase-in levels and top marginal tax rates vary.
5 min readOnly three European countries levy a net wealth tax, namely Norway, Spain, and Switzerland. Belgium, Italy, and the Netherlands levy wealth taxes on selected assets, but not on an individual’s net wealth per se.
2 min readTaken together, these proposed tax changes would significantly raise marginal and effective tax rates and increase the cost of capital, all of which would lead to a reduced level of output and less revenue than anticipated.
5 min readInstead of raising revenue from a narrow tax base through high tax rates, policymakers should identify options to raise revenue efficiently through broad-based taxes consistent with sound tax policy.
4 min readElizabeth Warren released a detailed plan on how she would fund Medicare For All, proposing a wealth tax, financial transactions tax, mark-to-market taxation of capital gains income, and a country-by-county minimum tax, among other reforms.
5 min readRemoving step-up in basis would encourage taxpayers to realize capital gains and it would plug a hole in the current income tax, while increasing federal revenue. Combined, however, with the estate tax, this would result in a significant tax burden on certain saving by requiring both the appreciation in and total value of transferred property to be taxed at death
2 min readJCT’s report on capital gains elasticities reminds us that capital gains realizations, at least under a tax system that allows deferral, are sensitive to tax rates. Moving to mark-to-market taxation of all capital gains would remove this sensitivity by taxing capital gains annually.
4 min readFacing an $838 million budget shortfall, a looming pension crisis, and an aggressive spending wish list, some Chicago policymakers and activists are expressing interest in a laundry list of new and higher taxes that could, collectively, raise as much as an additional $4.5 billion a year.
6 min readWyden’s “mark-to-market” proposal strives to subject capital gains to the same treatment as ordinary income. While the plan resolves the “lock in effect” issue and would make the tax code more progressive, it would increase the tax burden on savers and increase tax code complexity.
2 min readVan Hollen’s proposals add to the long list of Democratic Party tax proposals that attempt to both raise additional revenue from corporations and high-income households and make the tax code more progressive and “equitable.”
3 min readWarren’s comparison between the property tax and her proposed wealth tax makes a good sales pitch. However, there are important differences between the taxes. By no means is the property tax in many jurisdictions perfect, but it is generally better structured than a wealth tax.
4 min readAmerica’s tax code distorts the economic decision-making of firms, such as the favorable treatment of debt financing over equity. This study adds to this argument while providing motivation for policymakers to focus on how reforms to tax policy can increase American entrepreneurship.
2 min readCapital gains taxes create a burden on saving because they are an additional layer of taxes on a given dollar of income. The capital gains tax rate cannot be directly compared to individual income tax rates, because the additional layers of tax that apply to capital gains income must also be part of the discussion.
14 min readA key element of America’s dynamism problem is a drop in entrepreneurship. Removing tax barriers for entrepreneurs would improve America’s dynamism while making America’s tax code more neutral, efficient, and simple for all taxpayers.
25 min readFederal tax rates vary by income group and tax source. The federal tax system redistributes income from high- and low-income taxpayers.
3 min read