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IMF Tax Proposals: Shrink Inequality or Sink Post-Pandemic Recovery?

Countries face twin economic challenges with the COVID-19 pandemic: maintain fiscal support to businesses that have been affected by the pandemic and prepare for an uneven and uncertain economic recovery, and work towards budgetary stability and reduce the risks associated with growing public debt. However, moving too fast towards budgetary stability either through tax hikes […]

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Leveling Up: The UK’s Super-Deduction and its Regional Divide

The UK government has made “leveling up”—a push to boost economic performance in less thriving regions of the UK—one of its top policy priorities. The recent introduction of a UK super-deduction for capital investments in plant and equipment will likely contribute to this goal. Higher capital allowances for plant and equipment disproportionally help capital-intensive industries […]

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Marginal Effective Tax Rates and the 2021 UK Budget

Table of Contents Key Findings The 2021 UK budget introduces a two-year super-deduction of 130 percent for plant and equipment and a delayed corporate tax rate increase from 19 percent to 25 percent in 2023. These policies have differential impacts on marginal effective tax rates (METRs) for different assets, implying investment incentives will not be […]

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Wyden’s Energy Tax Proposal a Mixed Bag

With the $1.9 trillion American Rescue Act package signed into law, lawmakers are looking for the next issue to tackle. As the Biden administration turns toward infrastructure, Sen. Ron Wyden (D-OR) has suggested including reforms to the way the tax code subsidizes energy production in such a package. Wyden introduced the Clean Energy for America […]

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The UK Should Not Ignore Problems with its Corporate Tax Base

Wednesday, the United Kingdom will publish its 2021 budget, after the fall budget was delayed due to the pandemic. In addition, the UK government will launch several consultations on the future of the country’s tax strategy on March 23. Changes to the corporation tax—particularly an increase in the UK’s 19 percent corporation tax rate—are reportedly among […]

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Changes to the Tax Base Matter When Evaluating the Impact of Tax Reforms

In December, scholars David Hope and Julian Limberg released a study with the London School of Economics (LSE) examining the economic effects of reducing tax rates for high-income individuals and corporations. The paper illustrates how overlooking an important element of the tax system—the structure of the tax base—can lead to an incomplete understanding of how […]

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How Expensing for Capital Investment Can Accelerate the Transition to a Cleaner Economy

Key Findings Expensing for capital investments would increase new investment and capital stock turnover, supporting the replacement of old capital with more environmentally friendly structures, machinery, and equipment. Lowering the cost of investment would eliminate the tax bias against more capital-intensive energy efficiency improvement projects. Neutral cost recovery for structures would increase apartment building construction, […]

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Tax Extenders Hitch a Ride on Omnibus and COVID-19 Relief Deal

Tax extenders are no stranger to hitching a last-minute ride on year-end legislation. This year they made another last-minute appearance, finding a hold in their own division of the 5,593-page bill to fund the government through the fiscal year and provide additional coronavirus relief through March. If you’ve followed the extenders debate, you know that […]

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Increasing the Tax Burden on Capital Investment and Automation Hurts Workers

Over the past half decade, there has been an ongoing debate about how automation and the use of robots in the workplace has impacted workers’ wages and employment. Recently, economists Andrea Manera and Daron Acemoglu of the Massachusetts Institute of Technology (MIT) and Pascual Restrepo of Boston University examined whether tax policy favors certain forms […]

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Prospects for Federal Tax Policy After the 2020 Election

As Americans receive more clarity on the outcome of the 2020 presidential and congressional elections, the prospects for federal tax policy headed into 2021 are also becoming clearer. A Biden administration may have to work with a Republican Senate majority (pending the results of runoff elections in Georgia) and a Democrat-controlled House to navigate various […]