The Fifth Circuit has affirmed states’ authority over their respective tax policies and has asserted that the offset clause—often called the “Tax Mandate”—of the American Rescue Plan Act (ARPA) has enough fiscal impact on a state’s budget so as to be coercive, as opposed to incentivizing.
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Puerto Rico, a US territory with a limited ability to set its own tax policies, will be the first part of the US to be substantially affected by Pillar Two, the global tax agreement that seeks to establish a 15 percent minimum tax rate on corporate income.
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The Treasury Department recently touted strong business investment in the years following the pandemic-driven recession and pointed to the Biden administration’s industrial policies in the Inflation Reduction Act and CHIPS Act as key drivers.
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The OECD recently released a trove of new documents on a draft multilateral tax treaty. The U.S. Treasury has opened a 60-day consultation period for the proposal and is requesting public review and input.
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Now is the time for lawmakers to focus on long-term fiscal sustainability, as further delay will only make an eventual fiscal reckoning that much harder and more painful. Congressional leaders should follow through on convening a fiscal commission to deal with the long-term budgetary challenges facing the country.
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Congress should recognize that Pillar Two has significant U.S.-specific downsides, but also that it cannot unilaterally stop Pillar Two from taking effect. Instead, it should carefully consider a policy response for the next Congress, when a variety of forces are likely to compel it to act.
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The early evidence indicates that making a “good return greater” through Opportunity Zone tax incentives is an ineffective and poorly targeted way to raise the living standards of low-income residents.
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Congress should reconsider key elements of the IRA, including the book minimum tax and the green energy credits, with an eye towards simplification and fiscal responsibility.
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Short FormThe technical rules that were once solely the province of tax wonks in D.C. and Paris are being brought out into the public sphere.
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The JCT analysis raises some useful questions for the U.S. domestic debate over Pillar Two. The Treasury Department should examine its support for an agreement that will reduce its own revenue intake. But it is also worth noting that the principal mechanism for the revenue reduction—the foreign tax credit—is a policy already baked into U.S. law, including the Republican-enacted global minimum tax from 2017. The OECD deal merely takes advantage of this longstanding feature.
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Lawmakers should avoid delivering social and economic benefits through the tax code whenever possible and work to simplify or repeal the tax expenditures already in the tax code.
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Rather than continue down the path of growing debt, lawmakers should craft a comprehensive solution. International experience cautions against tax-based fiscal consolidations, but modest tax increases may be part of a successful debt reduction package.
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According to the International Monetary Fund (IMF), the U.S. federal government is among the most indebted governments in the world.
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As policymakers look to tackle America’s debt and deficit crisis, they should consider international experiences on successful fiscal consolidations.
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Focusing on the “threat” to European industry caused by the Inflation Reduction Act rather than internal tax system flaws puts the EU at risk of slower economic growth and possibly losing some of its important industrial base. It is also contrary to the EU’s geopolitical goals.
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Treasury Secretary Janet Yellen offered estimates from the EU Tax Observatory as evidence that the Polish government would benefit from supporting the global tax deal. Unfortunately, evidence was, at best, out of date.
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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.
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States will continue to cut taxes because revenues are skyrocketing. But some will also be keeping a close eye on litigation targeting this dubious restriction on states’ fiscal autonomy.
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Kentucky and Tennessee won an important legal victory Friday when a federal court ruled that the American Rescue Plan Act (ARPA)’s restrictions on state fiscal autonomy were unconstitutional and enjoined (blocked) the enforcement of those provisions against both states.
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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.
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