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Losing the Future: The Decline of U.S. Saving and Investment

November 21, 2014 Comments off

Losing the Future: The Decline of U.S. Saving and Investment
Source: Tax Foundation

Key Findings

  • Saving and investment are necessary for a society to adequately provide for its future.
  • Saving and investment have declined substantially as a percentage of GDP over the last 40 years, and have collapsed almost entirely since the financial crisis.
  • American private saving barely keeps pace with total government deficits. On the whole, the country saves very little.
  • American investment barely keeps pace with depreciation; U.S. private and public capital stock and infrastructure deteriorates almost as quickly as it can be repaired or replaced with new investment.
  • The U.S., overall, does not save enough money to fund all of the worthwhile domestic investments and relies substantially on foreign investors to make up the difference.
  • Tax reform could help the U.S. become a forward-looking economy that invests and saves at more prudent rates.
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Wireless Taxation in the United States 2014

November 19, 2014 Comments off

Wireless Taxation in the United States 2014
Source: Tax Foundation

Key Findings

  • Americans pay an average of 17.05 percent in combined federal, state, and local tax and fees on wireless service. This is comprised of a 5.82 percent federal rate and an average 11.23 percent state-local tax rate.
  • The five states with the highest state-local rates are: Washington State (18.6 percent), Nebraska (18.48 percent), New York (17.74 percent), Florida (16.55 percent), and Illinois (15.81 percent).
  • The five states with the lowest state-local rates are: Oregon (1.76 percent), Nevada (1.86 percent), Idaho (2.62 percent), Montana (6.00 percent), and West Virginia (6.15 percent).
  • Four cities—Chicago, Baltimore, Omaha, and New York City—have effective tax rates in excess of 25 percent of the customer bill.
  • The average rates of taxes and fees on wireless telephone services are more than two times higher than the average sales tax rates that apply to most other taxable goods and services.
  • Excessive taxes on wireless consumers disproportionately impacts poorer families.

Tax Reform in the UK Reversed the Tide of Corporate Tax Inversions

November 19, 2014 Comments off

Tax Reform in the UK Reversed the Tide of Corporate Tax Inversions
Source: Tax Foundation

Key Findings

  • The United States is not the only country to experience the phenomenon of corporate tax inversions.
  • Despite cutting the corporate tax rate from 52 percent in 1980 to 28 percent by 2008, the UK levied one of the higher corporate tax rates in Europe and operated under one of the few remaining worldwide tax systems.
  • As a result of the high rate and worldwide tax system, many British companies left or announced plans to “invert”; the UK faced an “exodus of British companies fleeing the tax system.”
  • In response, the UK government implemented both a territorial tax system and a series of corporate tax reforms that will lower the corporate tax rate from 28 percent in 2010 to 20 percent in 2015.
  • After these changes, UK corporate inversions reversed, and many American companies now aim to move to the UK. Further, the total number of UK corporations has grown to 1.1 million as of 2012, and it is on track to overtake the U.S. in number of corporations by 2017.
  • Lawmakers in the U.S. would do well to follow the British example on corporate inversions by lowering our corporate tax rate—the third-highest in the entire world—and replacing our worldwide tax system with a modern territorial system.

The Impact of Piketty’s Wealth Tax on the Poor, the Rich, and the Middle Class

October 24, 2014 Comments off

The Impact of Piketty’s Wealth Tax on the Poor, the Rich, and the Middle Class
Source: Tax Foundation

In his bestseller Capital in the Twenty-First Century, Thomas Piketty recommends a wealth tax as a remedy to inequality. The basic version of Piketty’s wealth tax would impose a tax rate of 1 percent on net worth of $1.3 million and $6.5 million and 2 percent on net worth above $6.5 million. Piketty contemplates additional tax brackets, including a bracket of 0.5 percent starting at about $260,000.

We used the Tax Foundation’s Taxes and Growth (TAG) model, augmented with wealth data from the University of Michigan’s Panel Study of Income Dynamics, to estimate how the U.S. economy would respond to Piketty’s wealth taxes.

2015 Tax Brackets

October 23, 2014 Comments off

2015 Tax Brackets
Source: Tax Foundation

Every year, the IRS adjusts more than 40 tax provisions for inflation. This is done to prevent what is called “bracket creep.” This is the phenomenon by which people are pushed into higher income tax brackets or have reduced value from credits or deductions due to inflation instead of an actual increase in real income.

The IRS uses the Consumer Price Index (CPI) to calculate the past year’s inflation and adjusts income thresholds, deduction amounts, and credit values accordingly. Rather than directly adjusting last year’s values for annual inflation, each provision is adjusted from a specified base year. For more information, see the methodology, below.

The Real Value of $100 in Each State

August 21, 2014 Comments off

The Real Value of $100 in Each State
Source: Tax Foundation

This week’s tax map shows the real value of $100 in each state. Because average prices for similar goods are much higher in California or New York than in Mississippi or South Dakota, the same amount of dollars will buy you comparatively less in the high-price states, or comparatively more in low-price states. Using data from the Bureau of Economic Analysis that we’ve written about previously, we adjust the value of $100 to reflect how prices are different in each state.

For example, Tennessee is a low-price state, where $100 will buy what would cost $110.25 in another state that is closer to the national average. You can think of this as meaning that Tennesseans are about ten percent richer than their nominal incomes suggest.

The states where $100 is worth the least are the District of Columbia ($84.60), Hawaii ($85.32), New York ($86.66), New Jersey ($87.64), and California ($88.57). That same money goes the furthest in Mississippi ($115.74), Arkansas ($114.16), Missouri ($113.51), Alabama (113.51), and South Dakota ($113.38).

How Much Do U.S. Multinational Corporations Pay in Foreign Income Taxes?

May 27, 2014 Comments off

How Much Do U.S. Multinational Corporations Pay in Foreign Income Taxes?
Source: Tax Foundation

Key Findings

  • The United States’ worldwide system of corporate taxation requires multinational corporations to pay taxes twice, first to the foreign country in which they do business and then to the IRS after they repatriate their profits.
  • Multinational corporations reported paying $128 billion in corporate taxes to foreign countries on $470 billion of taxable income in 2010, according to most recent IRS data.
  • Over the past eighteen years, foreign corporate taxable income has grown by about 250 percent and foreign corporate taxes paid by 265 percent, while the effective tax rate has remained around 26 percent.
  • The effective tax rate on foreign income was 27.2 percent in 2010, prior to paying additional taxes to the United States.
  • More than 60 percent of all reported foreign taxable income was earned in Europe and Asia in 2010.
  • The effective tax rate faced by U.S. multinationals abroad varies substantially by region and country and is higher than 60 percent in some nations.
  • While some corporations pay low effective rates in some countries on foreign income, U.S. multinationals faced effective rates over 20 percent on most income earned overseas, prior to paying taxes to the United States.
  • 60 percent of income earned abroad was by manufacturers. Most was income from petroleum and coal manufacturers, who paid an average effective tax rate of 36 percent.
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