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Tax Distribution and Economic Trends

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Corporate Income Tax Reform: Dreaming On (Article)
Eric Toder

Both political parties are calling for corporate tax reform without agreement on specifics. Proposals to broaden the corporate tax base to pay for lower rates or to eliminate taxes on corporate repatriations while trying to prevent income shifting do not address the main problems of taxing multinational corporations in a global economy. This article discusses the need for more fundamental structural reforms and offers up two ideas – securing international agreement on better rules to allocate profits of multinationals among taxing jurisdictions or, alternatively, replacing the U.S. corporate tax with full taxation of dividends and accrued capital gains of U.S. shareholders.

Posted to Web: January 28, 2014Publication Date: January 28, 2014

The War on Poverty Moves to the Tax Code (Article/Tax Facts)
Leonard E. Burman, Elaine Maag

In 1975, the federal income tax code joined the "War on Poverty" with the enactment of the earned income tax credit (EITC). Today, tax credits form some of the largest and most effective anti-poverty programs in the US. In 2012, the Census Bureau estimated that tax credits cut poverty (under a broad measure that includes the effect of programs like Supplemental Nutrition Assistance Program benefits and the EITC) by 3 percentage points – more than SNAP (1.6 points) and TANF (0.2 points). The tax credits cut child poverty by a whopping 6.7 percentage points.

Posted to Web: January 07, 2014Publication Date: January 06, 2014

Residential Property Taxes in the United States (Research Report)
Benjamin H. Harris, Brian David Moore

This brief presents an overview of residential property taxes. The brief considers recent trends in aggregate property tax revenues and examines the property tax at the county level. Property taxes are an important source of revenue for local governments, though effective property tax rates vary substantially by state and region. The counties with the highest property tax burdens tend to be in New York and New Jersey, while the counties with the lowest property tax burdens are located in Alabama and Louisiana. Most counties levy property taxes that are around $1,000 per homeowner and below 1 percent of house value.

Posted to Web: November 18, 2013Publication Date: November 18, 2013

SOI Releases New Data From Form W-2 (Article/Tax Facts)
Jim Nunns

Newly released W-2 data from the Statistics of Income (SOI) Division of IRS describe in detail the wages and retirement contributions of workers from 2008 through 2010. SOI economists Kevin Pierce and Jon Gober provide an overview of the data and compare them with (much less detailed) data for prior years in an SOI Bulletin article. Three charts illustrate the depth and usefulness of the data.

Posted to Web: October 07, 2013Publication Date: October 07, 2013

Who Pays No Income Tax? A 2013 Update (Article/Tax Facts)
Roberton Williams

TPC estimates that 43 percent of Americans will pay no federal income tax this year, down from the peak of 50 percent in 2008 and 2009.

Posted to Web: September 30, 2013Publication Date: September 30, 2013

Who Benefits from Tax-Exempt Bonds?: An Application of the Theory of Tax Incidence (Research Report)
Harvey Galper, Joseph Rosenberg, Kim Rueben, Eric Toder

This paper applies tax incidence theory to estimate the distributional effects of the exemption from federal income tax of interest on state and local bonds and the President's proposal to limit the benefit of the exemption to the 28 percent rate. When one accounts for the effects of changes in rates of return, the exemption still primarily benefits higher-income individuals, though less so than under the traditional approach that assigns all the benefit to holders of tax-exempt bonds. How states and localities respond to lower borrowing costs can either shift benefits to low-income households or increase the net benefit to high income households.

Posted to Web: September 27, 2013Publication Date: September 27, 2013

Measuring Income for Distributional Analysis (Research Report)
Joseph Rosenberg

This document describes the income measure the Tax Policy Center (TPC) uses to analyze the distribution of federal taxes. TPC's income measure, which we call "expanded cash income" (ECI), is a broad measure of pre-tax income. We use it both to rank tax units in distribution tables and to calculate effective tax rates. Compared to narrower measures of income—such as AGI or cash income (the income measure used previously by TPC)—ECI provides a more accurate ranking of taxpayers and better estimates of the overall burden of the federal tax system and the effect of tax policy changes.

Posted to Web: July 25, 2013Publication Date: July 25, 2013

Evaluating Broad-Based Approaches for Limiting Tax Expenditures (Research Report)
Eric Toder, Joseph Rosenberg, Amanda Eng

This paper evaluates six options to achieve across-the-board reductions to a group of major exclusions and deductions in the income tax: (1) limiting their tax benefit to a maximum percentage of income, (2) imposing a fixed dollar cap, (3) reducing them by fixed-percentage amount, (4) limiting their tax saving to a maximum percentage of their dollar value, (5) replacing them with fixed rate refundable credits, and (6) including them in the base of the existing Alternative Minimum Tax (AMT). We discuss issues of design, implementation, and administration, and simulate the revenue, distributional, and incentive effects of the various options.

Posted to Web: July 10, 2013Publication Date: July 10, 2013

State and Local Tax Deductions (Article/Tax Facts)
Yuri Shadunsky

Federal taxpayers choose between itemizing deductions and claiming the standard deduction. Itemizers can claim deductions for state and local income and property taxes paid. (Through 2013, taxpayers may deduct state and local sales taxes paid in lieu of income taxes.) In 2011, 46.6 million taxpayers claimed the deduction for state and local taxes paid, deducting almost $470 billion from their tax returns.

Posted to Web: July 01, 2013Publication Date: July 01, 2013

Limiting the Tax Exclusion of Employer-Sponsored Health Insurance Premiums: Revenue Potential and Distributional Consequences (Policy Briefs/Timely Analysis of Health Policy Issues)
Lisa Clemans-Cope, Stephen Zuckerman, Dean Resnick

The exclusion of employer-sponsored health insurance premiums and medical benefits reduced federal tax revenues by $268 billion in 2011 alone-by far the largest federal tax expenditure. Moreover, the exclusion disproportionately subsidizes those with higher incomes. In this brief, we provide estimates of the revenue potential and distributional consequences of limiting the exclusion from income and payroll taxes at the 75th percentile of 2013 premiums, indexing by GDP. The policy would produce $264.0 billion in new tax revenues over the coming decade while preserving 93 percent of the tax subsidies available under the current policy.

Posted to Web: May 08, 2013Publication Date: May 08, 2013

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