A higher tax burden on labor often leads to lower employment rates and wages. That’s important for policymakers to remember as they look for ways to help their economies recover from coronavirus-induced shutdowns. If their goal is to encourage employment, policies that lower the tax burden on labor could prove a powerful tool.
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The COVID-19 pandemic and accompanying economic downturn will wreak havoc on state and local tax revenues, with projections of a 15-20 percent decline in state revenues. Our new report provides a framework for how to design an effective state and local relief package.
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Other countries have shown that providing deductions in line with invested capital costs can have positive impacts both on investment and on debt bias.
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Gov. Hogan vetoed a proposed first-in-the-nation digital advertising tax that would have imposed rates of up to 10 percent on digital advertising served to Marylanders.
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What challenges should we expect to face as the U.S. economy begins to re-open? When is the right time for legislators to start focusing on long-term recovery vs. short-term needs? What policies should federal legislators pursue to clear a path to recovery?
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Policymakers will have to consider design options for accelerating NOL deductions to ensure the refunds are simple, provide targeted relief to struggling firms, and are consistent with long-run revenue needs.
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When considering long-term policies for increasing long-run levels of investment and economic growth, full expensing and neutral cost recovery are better targeted than policies like a capital gains cut.
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Inventory taxes are levied regardless of whether a business makes a profit, adding to the burden of businesses already struggling to stay afloat.
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The OECD recently announced that the negotiation timeline for new digital tax proposals has now been pushed back to October due to the COVID-19 pandemic, although the end-of-year deadline for the overall project is still in place.
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As many businesses may need time to return to profitability after this crisis, states should prioritize reducing reliance on capital stock taxes, and shift toward more neutral forms of business taxation.
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Permanent full expensing for all types of investment is an effective policy change lawmakers can use to encourage additional investment and economic growth.
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One of the most cost-effective policy changes would be to make full expensing of machinery and equipment permanent and extend this important tax treatment to structures as well as for firms in a net operating loss position.
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Virginia enacted a biennial budget, which includes a new excise tax on “skill games.” Meanwhile, Arizona and Connecticut announced plans to convene in special sessions later this year while Oklahoma gets the green light to use rainy day fund money to close budget gaps.
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What could the next phase of relief look like and what role does tax policy play in ensuring the U.S. and countries around the world make a strong economic recovery?
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The U.S. Department of the Treasury recently issued new guidance on allowable expenses using the $150 billion in state aid provided under the CARES Act, a point on which there has been considerable confusion.
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The sooner federal policymakers or regulators clarify tax questions about the Paycheck Protection Program (PPP), the more certainty firms will have when they accept the economic relief to keep their businesses afloat.
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When businesses and taxpayers look to the government for relief, it is paramount that lawmakers do their best to craft transparent and coherent legislation that is the least confusing for all.
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While it’s unclear how soon state economies may be able to fully open again, it’s not too early for states to consider how they can remove barriers to businesses & consumers resuming activity.
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Governments at all levels must work to remove the tax policy barriers that stand in the way of economic recovery and long-term prosperity following the COVID-19 crisis. Our new guide outlines several comprehensive options that policymakers can take at the federal and state levels.
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