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New From the GAO

July 29, 2014 Comments off

New GAO Reports and Testimonies
Source: Government Accountability Office

Reports

1. USDA Farm Programs: Farmers Have Been Eligible for Multiple Programs and Further Efforts Could Help Prevent Duplicative Payments. GAO-14-428, July 8.
http://www.gao.gov/products/GAO-14-428
Highlights – http://www.gao.gov/assets/670/664671.pdf

2. 401(K) Plans: Improvements Can Be Made to Better Protect Participants in Managed Accounts. GAO-14-310, June 25.
http://www.gao.gov/products/GAO-14-310
Highlights – http://www.gao.gov/assets/670/664392.pdf

3. National Flood Insurance Program: Additional Guidance on Building Requirements to Mitigate Agricultural Structures’ Damage in High-Risk Areas Is Needed. GAO-14-583, June 30.
http://www.gao.gov/products/GAO-14-583
Highlights – http://www.gao.gov/assets/670/664517.pdf

4. Medicaid Financing: States’ Increased Reliance on Funds from Health Care Providers and Local Governments Warrants Improved CMS Data Collection. GAO-14-627, July 29.
http://www.gao.gov/products/GAO-14-627
Highlights – http://www.gao.gov/assets/670/665076.pdf

Testimonies

1. Screening Partnership Program: TSA Has Improved Application Guidance and Monitoring of Screener Performance, and Continues to Improve Cost Comparison Methods, by Jennifer Grover, acting director, homeland security and justice, before the Subcommittee on Transportation Security, House Committee on Homeland Security. GAO-14-787T, July 29.
http://www.gao.gov/products/GAO-14-787T
Highlights – http://www.gao.gov/assets/670/665067.pdf

2. Budget Issues: Opportunities to Reduce Federal Fiscal Exposures Through Greater Resilience to Climate Change and Extreme Weather, by Alfredo Gomez, director, natural resources and environment, before the Senate Committee on the Budget. GAO-14-504T, July 29.
http://www.gao.gov/products/GAO-14-504T
Highlights – http://www.gao.gov/assets/670/665090.pdf

3. Federal Real Property: Better Guidance and More Reliable Data Needed to Improve Management, by David J. Wise, director, physical infrastructure issues, before the Subcommittee on Government Operations, House Committee on Oversight and Government Reform. GAO-14-757T, July 29.
http://www.gao.gov/products/GAO-14-757T
Highlights – http://www.gao.gov/assets/670/665086.pdf

4. Tobacco Taxes: Disparities in Rates for Similar Smoking Products Continue to Drive Market Shifts to Lower-Taxed Options, by David Gootnick, director, international affairs and trade, before the Senate Committee on Finance. GAO-14-811T, July 29.
http://www.gao.gov/products/GAO-14-811T
Highlights – http://www.gao.gov/assets/670/665082.pdf

5. Medicaid: Completed and Preliminary Work Indicate that Transparency around State Financing Methods and Payments to Providers Is Still Needed for Oversight, by Katherine M. Iritani, director, health care, before the Subcommittee on Energy Policy, Health Care and Entitlements, House Committee on Oversight and Government Reform. GAO-14-817T, July 29.
http://www.gao.gov/products/GAO-14-817T
Highlights – http://www.gao.gov/assets/670/665070.pdf

6. Combating Nuclear Smuggling: Past Work and Preliminary Observations on Research and Development at the Domestic Nuclear Detection Office, by David C. Trimble, director, natural resources and environment, before the Subcommittee on Cybsersecurity, Infrastructure Protection, and Security Technologies, House Committee on Homeland Security. GAO-14-783T, July 29.
http://www.gao.gov/products/GAO-14-783T
Highlights – http://www.gao.gov/assets/670/665073.pdf

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New From the GAO

July 28, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Railroad Retirement Board: Total and Permanent Disability Program at Risk of Improper Payments. GAO-14-418,June 26.
http://www.gao.gov/products/GAO-14-418
Highlights – http://www.gao.gov/assets/670/664467.pdf

2. Consumer Financial Protection Bureau: Opportunity Exists to Improve Transparency of Civil Penalty Fund Activities. GAO-14-551, June 26.
http://www.gao.gov/products/GAO-14-551
Highlights – http://www.gao.gov/assets/670/664452.pdf

3. Drinking Water: EPA Program to Protect Underground Sources from Injection of Fluids Associated With Oil and Gas Production Needs Improvement. GAO-14-555, June 27.
http://www.gao.gov/products/GAO-14-555
Highlights – http://www.gao.gov/assets/670/664500.pdf

4. Media Ownership: FCC Should Review the Effects of Broadcaster Agreements on Its Media Policy Goals. GAO-14-558, June 27.
http://www.gao.gov/products/GAO-14-558
Highlights – http://www.gao.gov/assets/670/664485.pdf

5. Security Clearances: Tax Debts Owed by DOD Employees and Contractors. GAO-14-686R, July 28.
http://www.gao.gov/products/GAO-14-686R

OECD releases full version of global standard for automatic exchange of information

July 24, 2014 Comments off

OECD releases full version of global standard for automatic exchange of information
Source: OECD

Taking an important step towards greater transparency and putting an end to banking secrecy in tax matters, the OECD today released the full version of a new global standard for the exchange of information between jurisdictions.

The Standard for Automatic Exchange of Financial Account Information in Tax Matters calls on governments to obtain detailed account information from their financial institutions and exchange that information automatically with other jurisdictions on an annual basis. The Standard, developed at the OECD under a mandate from the G20, endorsed by G20 Finance Ministers in February 2014, and approved by the OECD Council.

The Standard provides for annual automatic exchange between governments of financial account information, including balances, interest, dividends, and sales proceeds from financial assets, reported to governments by financial institutions and covering accounts held by individuals and entities, including trusts and foundations. The new consolidated version includes commentary and guidance for implementation by governments and financial institutions, detailed model agreements, as well as standards for harmonised technical and information technology solutions, notably a standard format and requirements for secure transmission of data.

TIGTA — Fiscal Year 2014 Statutory Review of Disclosure of IRS Collection Activity With Respect to Joint Returns

July 24, 2014 Comments off

Fiscal Year 2014 Statutory Review of Disclosure of Collection Activity With Respect to Joint Returns
Source: Treasury Inspector General for Tax Administration

Highlights of Reference Number: 2014-30-046 to the Internal Revenue Service Commissioners for the Small Business/Self-Employed and Wage and Investment Divisions.

IMPACT ON TAXPAYERS
Internal Revenue Code (I.R.C.) Section (§) 6103(e)(8) gives joint filer taxpayers who are no longer married or no longer reside in the same household the right to request information regarding the IRS’s efforts to collect delinquent taxes on their joint tax return liabilities. If the IRS does not provide employees sufficient guidance for handling those requests, taxpayer rights could potentially be violated.

WHY TIGTA DID THE AUDIT
This audit was initiated because the IRS Restructuring and Reform Act of 1998 added I.R.C. § 7803(d)(1)(B), which requires TIGTA to annually review and certify the IRS’s compliance with I.R.C. § 6103(e)(8). The objective of this review was to determine whether the IRS is complying with the provisions of I.R.C. § 6103(e)(8) as related to the disclosure of collection activities with respect to joint filers.

WHAT TIGTA FOUND
IRS procedures provide employees with sufficient guidance for handling joint filer collection activity information requests. However, TIGTA could not determine whether the IRS fully complied with I.R.C. § 6103(e)(8) requirements when responding to written collection activity information requests from joint filers. IRS management information systems do not separately record or monitor joint filer requests, and there is no legal requirement for the IRS to do so. Further, TIGTA does not recommend the creation of a separate tracking system.

WHAT TIGTA RECOMMENDED
TIGTA made no recommendations in this report. IRS officials were provided an opportunity to review the draft report and did not provide any comments.

Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits (hearing and report)

July 24, 2014 Comments off

Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits
Source: Senate Permanent Subcommittee on Investigations

The Permanent Subcommittee on Investigations has scheduled a hearing, “Abuse of Structured Financial Products: Misusing Basket Options to Avoid Taxes and Leverage Limits,” on Tuesday, July 22, 2014, at 9:30 a.m., in Room 216 of the Hart Senate Office Building.

The Subcommittee hearing will examine a set of transactions that utilize financial engineering and structured financial products to attempt to avoid paying U.S. taxes on short-term capital gains. Witnesses will include representatives of major financial institutions, as well as tax experts from a nonprofit institution and the U.S. Government Accountability Office.

Flattening Tax Incentives for Retirement Saving

July 19, 2014 Comments off

Flattening Tax Incentives for Retirement Saving
Source: Brookings Institution

The United States’ pension system has failed millions of workers who enter into retirement with very limited assets relative to what they need to live securely the rest of their lives. According to Survey of Consumer Finance data, about 40 percent of households headed by someone near retirement (ages 55–64) do not hold any assets in retirement savings accounts. The median retirement savings account balance for all households in this age group is only $12,000 (Rhee 2013).

At the same time, the pension landscape has been gradually shifting away from defined benefit (DB) pension plans toward defined contribution (DC) plans. The shift is especially pronounced in the private sector. Between 1989 and 2012, the proportion of private industry full-time workers participating in DB pension plans declined from 42 to 19 percent, while the share participating in DC plans increased from 40 to 51 percent (Bureau of Labor Statistics 2013; Wiatrowski 2011). While DB plans often provide significant benefits for the lucky minority who have been in a single job for many years before retirement, DC plans can be more beneficial for a mobile workforce. At the same time, the transition from DB to DC plans has also presented new challenges.

Because DB pensions are tied to employers, long-term workers sometimes achieve adequate protection even without much planning on their own part. They are automatically enrolled and often do not even have to contribute. Benefits are automatically paid when workers retire. With DB pensions, employers bear the responsibility for ensuring that employees receive pension benefits. In contrast, DC retirement accounts are owned by employees. With most DC plans, the most familiar of which are 401(k)-type plans, workers bear the responsibility for their own financial security. Unless such plans include automatic features, workers have to actively decide to participate, how much to contribute, which investments to put their money in, and how to manage their benefits through retirement.

This paper focuses on the effects of the tax preferences for employer-sponsored defined contribution plans. Using two notable microsimulation models, we simulate the effect of changes in contribution limits to retirement plans, the saver’s credit, and the exclusion of contributions from taxable income on current and future taxes and retirement savings. We find that reducing 401(k) contribution limits would primarily increase taxes for the richest taxpayers; expanding the saver’s credit would raise saving incentives and lower taxes for low- and middle-income taxpayers; and removing the exclusion for retirement saving incentives and replacing it with a 25 percent refundable credit will benefit some taxpayers—mainly low- and middle-income taxpayers—while raising taxes and reducing retirement assets for others—primarily those at the top of the income distribution.

New From the GAO

July 18, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Tax Policy: Differences in Definitions and Rules in the Tax Code. GAO-14-652R, July 18.
http://www.gao.gov/products/GAO-14-652R

2. Management Report: Improvements Are Needed in the Bureau of the Fiscal Service’s Information Systems Controls. GAO-14-693R, July 18.
http://www.gao.gov/products/GAO-14-693R

Corporate Inversions

July 17, 2014 Comments off

Corporate Inversions
Source: U.S. House of Representatives, Ways and Means Committee (Democrats)

Congress enacted Section 7874 of the Internal Revenue Code in 2004 as a way to discourage U.S. companies from acquiring smaller foreign companies and moving their tax home to a foreign jurisdiction as part of the overall transaction.

Under current law, a corporate inversion will not be respected for U.S. tax purposes if 80% or more of the new combined corporation (incorporated offshore) is owned by historic shareholders of the U.S. corporation (or, in the case of a partnership, interest owners of the partnership). Alternatively, if at least 60% (but less than 80%) of the combined foreign corporation is owned by historic shareholders of the U.S. corporation, the inversion itself will be respected but the expatriated entity will be subject to an “inversion gain,” including restrictions on the use of certain corporate attributes such as net operating losses. However, these unfavorable rules do not apply if the expanded affiliated group (“affiliated group”) that includes the combined corporation has “substantial business activities” (25% of employees by number, employees by compensation, assets, and income) in the foreign country where it is incorporated.

Since the provision was enacted in 2004, there have been almost 50 corporate inversions.

Positive and Normative Judgments Implicit in US Tax Policy and the Costs of Unequal Growth and Recessions

July 17, 2014 Comments off

Positive and Normative Judgments Implicit in US Tax Policy and the Costs of Unequal Growth and Recessions
Source: Harvard Business School Working Papers

We use official data and standard optimal tax conditions to infer the positive and normative judgments implicit in U.S. tax policy since 1979. We find that explanations within this framework for the time path of U.S. policy require central parameters of the model, namely the elasticity of taxable income or the marginal social welfare weights on top earners, to take unconventional values. We use inferred social preferences to provide novel estimates of the welfare costs of unequal growth and recessions and find that they are sensitive to the assumed distortionary costs of taxation and the year from which preferences are derived. We explore several possible explanations for our findings with available data.

Congress Should End – Not Extend – the Ban on State and Local Taxation of Internet Access Subscriptions

July 16, 2014 Comments off

Congress Should End – Not Extend – the Ban on State and Local Taxation of Internet Access Subscriptions
Source: Center on Budget and Policy Priorities

The Internet Tax Freedom Act (ITFA), enacted in 1998 and temporarily renewed in 2001, 2004, and 2007, imposed a moratorium on new state and local taxes on monthly Internet access fees while preserving (“grandfathering”) existing Internet access taxes. The House Judiciary Committee recently approved a bill to eliminate the grandfather provision and permanently ban all state and local taxation of Internet access subscriptions. This represents the first time that Congress has seriously considered a permanent ban on taxing Internet service for all states, including those now using these taxes to help support public services. Rather than extend ITFA indefinitely, Congress should lift the ban and let states decide whether they and their local governments will impose their sales and telecommunications taxes on Internet access charges.

CRS — Low-Income Assistance Programs: Trends in Federal Spending

July 16, 2014 Comments off

Low-Income Assistance Programs: Trends in Federal Spending (PDF)
Source: Congressional Research Service (via University of North Texas Digital Library)

This report examines the spending trends of 10 major need-tested benefit programs or groups of programs: (1) health care from Medicaid and the Children’s Health Insurance Program (CHIP); (2) the refundable portion of the health insurance tax credit enacted in the 2010 health care reform law; (3) the Supplemental Nutrition Assistance Program (SNAP); (4) assisted housing; (5) financial assistance for post-secondary students (Pell Grants); (6) compensatory education grants to school districts; (7) the Earned Income Tax Credit (EITC); (8) the Additional Child Tax Credit (ACTC); (9) Supplemental Security Income (SSI); and (10) Family Support Payments. The common feature of need-tested programs is that they provide benefits, services, or funding based on a measure of limited financial resources (income and sometimes assets). However, other than that common feature, the programs differ considerably in their target populations, services, and focus.

CRS — Recently Expired Charitable Tax Provisions (“Tax Extenders”): In Brief

July 15, 2014 Comments off

Recently Expired Charitable Tax Provisions (“Tax Extenders”): In Brief (PDF)
Source: Congressional Research Service (via University of North Texas Digital Library)

On April 3, 2014, the Senate Finance Committee voted to report the Expiring Provisions Improvement Reform and Efficiency (EXPIRE) Act (S. 2260), which would extend a set of expired tax provisions through the end of 2015. These and other temporary tax provisions that are regularly extended for one or two years are often referred to as “tax extenders.” This report briefly summarizes the temporary charitable tax provisions that expired at the end of 2013 and are being considered for extension. The report also discusses the economic impact of these charitable tax provisions.

Four charitable tax provisions are discussed in this report: (1) the enhanced charitable deduction for contributions of food inventory; (2) tax-free distributions from individual retirement accounts for charitable purposes; (3) basis adjustment to stock of S corporations making charitable contributions of property; and (4) special rules for contributions of capital gain real property for conservation purposes. There are other “tax extender” provisions that may affect tax-exempt entities discussed in other CRS products. Specifically, CRS Report R43510, Selected Recently Expired Business Tax Provisions (“Tax Extenders”) , by Jane G. Gravelle, Donald J. Marples, and Molly F. Sherlock includes a discussion of the modification of tax treatment of certain payments to controlling exempt organizations.1 Extender provisions related to the low-income housing tax credit, which may be relevant for tax-exempt organizations, are discussed in CRS Report R43449, Recently Expired Housing Related Tax Provisions (“Tax Extenders”): In Brief, by Mark P. Keightley.

CBO — Answers to Questions From Senator Hatch About Various Options for Payroll Taxes and Social Security

July 14, 2014 Comments off

Answers to Questions From Senator Hatch About Various Options for Payroll Taxes and Social Security
Source: Congressional Budget Office

Senator Orrin Hatch asked CBO several questions about the implications of altering the Social Security payroll tax rates as well as the taxable maximum (the maximum amount of earnings on which those payroll taxes are imposed). This document provides CBO’s answers to those questions.

For the various options discussed, CBO presents the changes that would result in the annual payroll taxes paid by employees and employers, and for people born at various times and with various levels of earnings, the change in their median lifetime payroll taxes and median initial replacement rates (benefits as a percentage of career-average earnings).

CBO based its answers on projections issued last September in The 2013 Long-Term Budget Outlook. In that report, the 75-year projection period for Social Security spans 2013 to 2087. All changes to payroll tax rates and the taxable maximum analyzed for this report would begin in January 2015.

TIGTA Report: IRS Should Modernize Process of Filing Amended Tax Returns

July 11, 2014 Comments off

TIGTA Report: IRS Should Modernize Process of Filing Amended Tax Returns
Source: Treasury Inspector General for Tax Administration

The Internal Revenue Service (IRS) should revise Form 1040, U.S. Individual Income Tax Return, to allow for corrections to original tax return filings and expand e-filing to include amended tax returns, according to a new report publicly released today by the Treasury Inspector General for Tax Administration (TIGTA).

Taxpayers currently file Form 1040X, Amended U.S. Individual Income Tax Return, to correct previously filed income tax returns. Claims filed on an amended tax return can relate to any item of income, loss, exclusion, deduction, or credit and may result in a tax refund. The IRS received more than four million amended tax returns in Fiscal Year (FY) 2012.

This audit was initiated because previous TIGTA audits have identified problems with IRS processes for verifying claims on amended tax returns. The objective of this review was to determine whether the IRS has controls in place to ensure that claims for refunds on amended tax returns are appropriate.

TIGTA found that the IRS could reduce erroneous refunds, processing costs, and taxpayer burden by revising the Form 1040, U.S. Individual Income Tax Return, to allow for corrections to original tax return filings and expand e-filing to include amended tax returns. TIGTA’s review of a statistical sample of 259 amended tax returns claiming tax refunds of $500 or more in FY 2012 identified 44 (17 percent) tax returns for which the IRS issued potentially erroneous tax refunds totaling $103,270.

Based on the sample results, TIGTA estimates the IRS may have issued more than $439 million in potentially erroneous tax refunds claimed on 187,421 amended tax returns during FY 2012. As such, the IRS could issue more than $2.1 billion in potentially erroneous tax refunds claimed on amended tax returns over the next five years.

In addition, TIGTA estimates that allowing taxpayers to amend their tax return by e-filing a modified Form 1040 could have potentially saved more than $17 million in processing costs during Fiscal Year 2012.

Repatriation Tax Holiday Would Lose Revenue And Is a Proven Policy Failure

July 9, 2014 Comments off

Repatriation Tax Holiday Would Lose Revenue And Is a Proven Policy Failure
Source: Center on Budget and Policy Priorities

Some policymakers are promoting another “repatriation tax holiday” to encourage multinational corporations to bring overseas profits back to the United States by offering them a temporary, very low tax rate on those profits. In particular, some have described a repatriation holiday as a “win-win” that would boost corporate investment and create jobs in the United States and also generate a tax windfall to help finance needed infrastructure spending. In reality, a repatriation tax holiday would accomplish neither goal and instead would worsen the nation’s fiscal and economic problems over time.

New From the GAO

July 7, 2014 Comments off

New GAO Reports
Source: Government Accountability Office

1. Pension Advance Transactions: Questionable Business Practices Identified. GAO-14-420, June 4.
http://www.gao.gov/products/GAO-14-420
Highlights – http://www.gao.gov/assets/670/663799.pdf

2. Private Pensions: Targeted Revisions Could Improve Usefulness of Form 5500 Information. GAO-14-441, June 5.
http://www.gao.gov/products/GAO-14-441
Highlights – http://www.gao.gov/assets/670/663854.pdf

3. IRS Correspondence Audits: Better Management Could Improve Tax Compliance and Reduce Taxpayer Burden. GAO-14-479, June 5.
http://www.gao.gov/products/GAO-14-479
Highlights – http://www.gao.gov/assets/670/663839.pdf

TIGTA — The Taxpayer Advocate Service Can Improve the Processing of Systemic Burden Cases

July 6, 2014 Comments off

The Taxpayer Advocate Service Can Improve the Processing of Systemic Burden Cases
Source: Treasury Inspector General for Tax Administration

IMPACT ON TAXPAYERS
Congress established the office of the National Taxpayer Advocate to assist taxpayers who experience difficulties resolving their tax problems with the IRS or receiving timely and appropriate responses to their inquiries. Many of these taxpayer issues fall under the category of systemic burden which involves instances in which an IRS process, system, or procedure has not operated as intended. It is important that the Taxpayer Advocate Service (TAS) effectively and efficiently assists taxpayers with systemic burden cases to ensure that taxpayers are not further harmed by problems with IRS processes.

WHY TIGTA DID THE AUDIT
This audit was initiated because TAS responses to systemic burden cases affect more than 85,000 taxpayers each year. TIGTA’s overall objective was to determine whether the TAS has an effective system to process taxpayer requests for relief due to systemic burden.

WHAT TIGTA FOUND
The TAS properly exercised its authorities when taking account-related actions to assist taxpayers. For example, TAS personnel can input a change of address to a taxpayer account, but the TAS does not have the authority to accept or deny requests for penalty abatements.

However, TIGTA’s review of the TAS’s handling of a statistical sample of cases found several areas where taxpayer service could be improved. Specifically, TIGTA identified in more than one-half of the cases that TAS personnel bypassed taxpayers’ authorized representatives, made unauthorized disclosures to third parties, or made numerous processing errors.

To help keep its workload manageable, the TAS has policies in place as to which types of cases it will accept and which it will refer to other IRS functions. However, the TAS often accepted cases that its policies noted should have been referred to other IRS functions. Accepting these cases increases the TAS’s workload; nonetheless, it is within the TAS’s discretion.

TIGTA identified unreliable data that was captured on the Taxpayer Advocate Management Information System, which could affect management decisions. In the 100 cases TIGTA statistically sampled, more than one-half had incorrect criteria, primary core issues, and/or relief codes.

WHAT TIGTA RECOMMENDED
TIGTA recommended that the National Taxpayer Advocate reissue guidance to TAS personnel explaining the requirement to contact only authorized representatives; review the three potential unauthorized disclosures of tax return information; provide training regarding their systemic burden case acceptance criteria; and reinforce the importance of ensuring that all actions taken on cases are correct and accurate.

In its response, the TAS agreed with seven of the eight recommendations and plans to take corrective actions. For the disagreed recommendation, TIGTA continues to believe that the TAS would benefit from tracking cases that were accepted using TAS’s discretion.

What Do OECD Data Really Show About U.S. Taxes and Reducing Inequality?

June 19, 2014 Comments off

What Do OECD Data Really Show About U.S. Taxes and Reducing Inequality?
Source: Center on Budget and Policy Priorities

Critics of proposals to make the tax system more progressive or to take other steps to help lessen widening income inequality[2] sometimes cite a 2008 Organisation for Economic Co-Operation and Development (OECD) report stating that the United States has the most progressive tax system among developed countries.[3] The implication is that, with a progressive tax system, the United States is already taking very substantial steps to address income inequality.

But to cite the report’s finding on the progressivity of the U.S. tax system while ignoring its other findings amounts to cherry picking and distorts the report’s overall findings. The report also shows that the United States does less to reduce income inequality than every other OECD country examined except Korea, when one considers both various taxes and cash transfer programs such as Social Security, unemployment insurance, and means-tested assistance programs.

Changes in Tax Revenue Since 1929

June 18, 2014 Comments off

Changes in Tax Revenue Since 1929
Source: Tax Policy Center (Urban Institute and Brookings Institution)

This Tax Fact examines sources of federal and state & local tax revenue, from 1929 to the present. The composition of revenues at all levels of government changed dramatically with World War II, but has remained roughly stable since. At the federal level, payroll taxes have grown dramatically, and individual income taxes remain a major source of revenue. At the state and local level, sales and property taxes account for about one-third of revenues.

The evolution of the UK tax base

June 18, 2014 Comments off

The evolution of the UK tax base (PDF)
Source: Sheffield Political Research Institute (University of Scheffield)

Taxation takes many different forms, encompassing progressive taxes such as income tax, regressive taxes such as Value Added Tax, and taxes targeted on private enterprises such as corporation tax. The economic downturn significantly affected tax revenues, and the Coalition Government since 2010 has sought to cut some taxes, to boost economic recovery, but at the same time raise others, in support of deficit reduction. It is important to consider, therefore, what impact these changes have had on the nature of the UK tax base as a whole. The evidence shows that regressive taxes now make up a higher proportion of tax revenues, and both progressive individual taxes and taxation targeted on private enterprises make up a lower proportion. Furthermore, revenue from business taxes is set to contract even further, even as economic growth returns, as proposed cuts are fully implemented.

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