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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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Congressional Budget Office and Tax Foundation Modeling Show That Some Tax Hikes Are More Damaging Than Others

A recent working paper by economists at the Congressional Budget Office (CBO) shows that not all taxes are created equal—progressive taxes on labor income and taxes on capital income would have a negative impact on the economy, capital investment, and jobs, especially when compared to flatter taxes on labor income. Policymakers should consider these results […]

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Testimony: Senate Budget Committee Hearing on the Progressivity of the U.S. Tax Code

Table of Contents Chairman Sanders, Ranking Member Graham, and members of the Committee. Thank you for the opportunity to testify before you today. There is no objective standard for what defines “fair share”; it is a purely subjective concept. But there are facts, which are objective, and the facts suggest that the U.S. tax and […]

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Sen. Elizabeth Warren’s Wealth Tax Legislation Faces Administrative and Economic Challenges

The United States has never had a comprehensive wealth tax, and while some European countries have them, many more have repealed wealth taxes over the past several decades. That has not deterred Sen. Elizabeth Warren (D-MA) with Reps. Pramila Jayapal (D-WA) and Brendan Boyle (D-PA) from introducing legislation to create a tax on household net […]

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Insights into the Tax Systems of Scandinavian Countries

Scandinavian countries are well-known for their broad social safety net and their public funding of services such as universal health care, higher education, parental leave, and child and elderly care. High levels of public spending naturally require high levels of taxation. In 2019, Denmark’s tax-to-GDP ratio was at 46.3 percent, Norway’s at 39.9 percent, and Sweden’s at […]

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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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A $6 Billion Tax Increase Proposal in Pennsylvania Would Yield the Nation’s Highest Combined Flat-Rate Income Taxes

Under the budget introduced by Pennsylvania Gov. Tom Wolf (D), taxes would go up more than $6 billion per year, with additional revenue from both individual and corporate income taxes. The state’s flat personal income tax rate would increase by 46 percent, partially offset by an outsized increase in the poverty credit, which would see […]

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Join Us for a Free “State Tax Policy Boot Camp”

We’re about to launch a free six-week course in state taxation, and we’d like you to join us. This coming Tuesday, February 16th, the Tax Foundation will kick off its “State Tax Policy Boot Camp,” designed with lawmakers and legislative staff in mind, but ideal for anyone interested in gaining a better understanding of state […]

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Summary of the Latest Federal Income Tax Data, 2021 Update

The Internal Revenue Service (IRS) has released data on individual income taxes for tax year 2018, showing the number of taxpayers, adjusted gross income, and income tax shares by income percentiles.[1] The new data shows how taxes changed in the first tax year after passage of the Tax Cuts and Jobs Act (TCJA) in December […]

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Washington State Floats a Wealth Tax Which Relies Almost Exclusively on Four People

What happens if you create a tax and its base is, for all intents and purposes, four people? If some Washington lawmakers had their way, we might find out. House Bill 1406 would impose a wealth tax exclusively on billionaires, accomplished by exempting the first $1 billion in household wealth. While most European countries have […]