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Yes, the U.S. Tax Code Is Progressive

As Congress considers several tax proposals designed to raise taxes on high-income earners, it’s worth considering the distribution of the existing tax code. While the image that rich Americans pay little taxes is popular, it’s a misconception: high-income individuals already pay a large share of taxes, even when compared to their share of national income. […]

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COVID-19 Tax Relief Added to Increasing Share of Households Paying No Income Tax

On Wednesday, the Tax Policy Center (TPC) released estimates on the portion of households with no federal income tax liability, finding that in 2020, about 60.6 percent of households did not pay income tax, up from 43.6 percent of households in 2019. Much of the 2020 increase was due to pandemic-related factors, but the growing […]

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Should the U.S. Copy Denmark’s Social Welfare Policies?

The Biden administration’s proposals to increase transfer payments and expand federal benefits in many ways resemble the social safety net policies of Scandinavian countries. 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 […]

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How Biden’s Business Tax Proposals Would Impact Taxpayers Across States

The Biden administration has proposed several tax increases on businesses, whether structured as C corporations subject to the corporate income tax or passthrough entities such as S corporations, partnerships, or sole proprietorships that are subject to the individual income tax. It is important to remember that those business taxes ultimately fall on people, including business […]

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Trade-offs of Expanding Individual Tax Credits While Repealing SALT Deduction

A key theme of our Options for Reforming America’s Tax Code 2.0 is that tax policy is a matter of trade-offs. For example, expanding the generosity of tax credits for lower-income individuals can help make the tax code more progressive, but it also reduces federal revenue. Pairing a credit expansion with a tax offset may […]

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Broad-Based Taxes on Consumption and User Fees Are Efficient Ways to Raise Federal Revenue for Infrastructure

One of the themes within Tax Foundation’s Options for Reforming America’s Tax Code 2.0 is that taxes on consumption tend to be a more economically efficient revenue source than taxes on income and capital that reduce the incentive to work and invest. Comparing the economic effects of taxes on consumption and income can apply to […]

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Taxing Consumption Progressively Is a Better Way to Tax the Wealthy

A new report from ProPublica argues that wealthy taxpayers face low effective tax rates as a portion of their wealth and mentions taxing unrealized capital gains or imposing a wealth tax. However, a better approach to raising the tax burden on the wealthy would be to pursue progressive consumption taxes as they have fewer administrative […]

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Joint Committee on Taxation Data Shows Federal Tax System Is Progressive

The Joint Committee on Taxation (JCT) recently released data on taxes paid at various levels of income, indicating the federal tax system is progressive, consistent with similar analysis by the Congressional Budget Office (CBO), and the Organisation for Economic Co-operation and Development (OECD). The JCT found that the bottom 50 percent of taxpayers faced an […]

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Top Personal Income Tax Rates in Europe

Most countries’ personal income taxes have a progressive structure, meaning that the tax rate paid by individuals increases as they earn higher wages. The highest tax rate individuals pay differs significantly across European OECD countries—as shown in today’s map. The top statutory personal income tax rate applies to the share of income that falls into […]

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Tax Policy in the First 100 Days of the Biden Administration

In his first 100 days as president, Joe Biden has proposed more than a dozen significant changes to the U.S. tax code that would raise upwards of $3 trillion in revenue and reduce incentives to invest, save, and work in the United States. While proposing ways to pay for new spending and for expanded refundable […]