One of the ways lawmakers intend to pay for $3.5 trillion of new spending in the budget reconciliation package is by creating “health care savings.” The leading proposal to achieve this is H.R. 3, the Elijah Cummings Lower Drug Costs Now Act, which would change the way that prescription drug prices are negotiated under Medicare Part D.
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How do current federal corporate tax rates and brackets compare historically?
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There are many ways the U.S.’s international tax rules could be changed, reformed, improved, or worsened. Reflexively jacking up taxes on U.S. multinationals does not necessarily accomplish the goal of reducing or eliminating profit shifting, and it would in fact worsen it.
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The Biden administration recently cited an analysis from Treasury claiming that “the President’s agenda will protect 97 percent of small business owners from income tax rate increases.” However, the figure is misleading. To assess the economic effect of higher marginal tax rates, it matters how much income or investment will be affected—not how many taxpayers.
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This interaction between the U.S. proposals and those that may be put into law in foreign jurisdictions should give lawmakers caution when evaluating the revenue potential of changes to GILTI.
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Recent Biden administration proposals rely heavily on revenue from better IRS tax collections to fund spending initiatives. The American Families Plan uses several avenues to reduce the tax gap (or the difference between taxes paid and taxes owed), from increasing the IRS’s tax enforcement budget to improving information technology and expanding reporting requirements.
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Sen. Wyden recently introduced the Small Business Tax Fairness Act—the impact of which we modeled—to reform the Section 199A pass-through business deduction created in the Tax Cuts and Jobs Act (TCJA) of 2017. The provision currently allows taxpayers to deduct up to 20 percent of their qualified business income from their taxable income, subject to certain limitations.
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Changes to international tax rules are likely on the way, and it is therefore important for lawmakers to understand how various reform options would impact U.S. tax burdens on multinational companies. Moreover, policymakers should also recognize the need for prudent policies that do not put U.S.-based multinationals at a competitive disadvantage or severely curtail investment and hiring.
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Learn about the tax gap, what it is, how the U.S. compares to other countries, and recent proposals aimed at closing it. We also explore how much revenue could actually be raised through increased tax enforcement, the current challenges the IRS faces, and how stronger enforcement could impact taxpayers at large.
While President Biden has many proposals aimed at increasing the supply of affordable housing, including tax credits, his plans to raise business taxes could hinder that goal.
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Tackling climate change and shifting the economy towards renewable energy has been a key part of the Biden administration’s agenda. However, this effort must first confront an overly complicated and non-neutral tax code, particularly in how it treats nuclear energy, for the White House to reach its ambitious goals.
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The Biden administration’s international tax proposals would impose a 7.7 percent surtax on the foreign profits of U.S. multinationals, resulting in a net increase in profit shifting out of the U.S.
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The arguments for a new surtax on corporate book income misconstrues why there are differences between a corporation’s taxable income and book income.
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While the Biden administration has certainly proposed to remove FDII, it is not clear that Congress is on board with that approach.
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While it makes sense to ensure cryptocurrency transactions are treated similarly to other financial assets, the nature of these requirements as written are potentially unworkable.
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The ideal treatment is to match the tax code to a firm’s cash flow—allow immediate deductions for all expenses, including all forms of investment, while taxing the resulting returns from the investments.
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Return-free filing could reduce compliance costs for many taxpayers, but would only be as good as the system it is administrating.
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To fully follow the Scandinavian model would require additional taxes that place a higher burden on middle-income earners, but instead, Biden proposes higher taxes on corporations and households making more than $400,000.
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While Congress continues to debate how to pay for President Biden’s spending proposals in the fiscal year 2022 budget, it is useful to consider the economic impact of a range of financing options in addition to the President’s proposed tax increases.
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