President Biden proposed a 7-point hike in the corporate tax rate to 28 percent, a new minimum book tax on corporate profits, and higher taxes on international activity. We estimated these proposals would reduce the size of the economy (GDP) by 1.6 percent over the long run and eliminate 542,000 jobs.
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Some tax ballot initiatives will be straightforward, some will be complex, and—let’s be honest—some will be a drafting nightmare.
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The Inflation Reduction Act primarily uses carrots, not sticks, to incentivize reductions in carbon emissions. It creates or expands tax credits for various low- or no-emission technologies, rather than imposing a generalized penalty for emissions, such as a carbon tax.
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Carryover tax provisions help businesses “smooth” their risk and income, making the tax code more neutral across investments and over time.
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The Inflation Reduction Act created numerous tax subsidy programs intended to accelerate the transition to a greener economy.
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In an already-challenging economic environment, new UK Prime Minister Liz Truss must get tax rates correct to avoid over-burdening a population and business sector facing immense uncertainty. Focusing only on rates while ignoring the base misses an opportunity for real, pro-growth reform.
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The Inflation Reduction Act focused more on enforcement and hiring more auditors rather than programs that make it easier for taxpayers to comply with the code and the IRS to administer it.
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In a pattern that has become all too common in recent decades, the newly enacted Inflation Reduction Act (IRA) added yet another layer of complexity to an already complex and burdensome federal tax code.
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Patent box regimes (also referred to as intellectual property, or IP, regimes) provide lower effective tax rates on income derived from IP. Most commonly, eligible types of IP are patents and software copyrights. Currently, 13 of the 27 EU member states have a patent box regime.
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Pillar One Amount A is meant to reallocate taxable profits of large multinationals, mitigate double taxation of profits, and avoid a harmful tax and trade war.
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The Inflation Reduction Act increases the IRS’s budget by roughly $80 billion over 10 years. The money is broken into four main categories—enforcement, operations support, business system modernization, and taxpayer services—as well as a few other small items such as an exploratory study on the potential of a free-file system.
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A marriage penalty exists when a state’s income brackets for married taxpayers filing jointly are less than double the bracket widths that apply to single filers. In other words, married couples who file jointly under this scenario have a higher effective tax rate than they would if they filed as two single individuals with the same amount of combined income.
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In dollar terms, the industries that would account for the largest book minimum tax liabilities are manufacturing, at $73.2 billion, followed by finance, insurance, and management at $46.9 billion.
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While exempting accelerated depreciation from the book minimum tax would reduce some of the economic harm of the tax, there remain many unresolved problems within the design and structure of the tax that make it a poorly chosen revenue option.
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In the rush to pass the Inflation Reduction Act, which features an ill-conceived tax on the book income of U.S. corporations, it is worth reminding policymakers of a well-established finding in the economic literature.
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Over the course of the last year, it has become clear that Democratic lawmakers want to change U.S. tax rules for large companies. However, as proposals have been debated in recent months, there are have been clear divides between U.S. proposals and the global minimum tax rules.
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Some 40 years ago, the U.S. dealt with high inflation and slow economic growth. Then as now, the solution is a long-term focus on stronger economic growth and sustainable federal budgets.
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