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The High Burden of State and Federal Capital Gains Tax Rates in the United States

May 22, 2015 Comments off

The High Burden of State and Federal Capital Gains Tax Rates in the United States
Source: Tax Foundation

Key Findings

  • The average combined federal, state, and local top marginal tax rate on long-term capital gains in the United States is 28.6 percent – 6th highest in the OECD.
  • This is more than 10 percentage points higher than the simple average across industrialized nations of 18.4 percent, and 5 percentage points higher than the weighted average.
  • Nine industrialized countries exempt long-term capital gains from taxation.
  • California has the 3rd highest top marginal capital gains tax rate in the industrialized world at 33 percent.
  • The taxation of capital gains places a double-tax on corporate income, increases the cost of capital, and reduces investment in the economy.
  • The President’s FY 2016 budget would increase capital gains tax rates in the United States from 28.6 percent to 32.8, the 5th highest rate in the OECD.

Estate and Inheritance Taxes around the World

May 1, 2015 Comments off

Estate and Inheritance Taxes around the World
Source: Tax Foundation

Key Findings

  • The U.S. has the fourth highest estate or inheritance tax rate in the OECD at 40 percent; the world’s highest rate, 55 percent, is in Japan, followed by South Korea (50 percent) and France (45 percent). Fifteen OECD countries levy no taxes on property passed to lineal heirs.
  • The U.S. estate tax has a high rate and a large exemption; as a result, it raises very little revenue and applies to very few households.
  • U.S. estate tax receipts have declined precipitously over the last fifteen years, from $38 billion (2015 dollars) in 2001 to an estimated $20 billion in 2015.
  • As estate taxes become narrow-based, meager revenue sources with high administrative costs, repeal becomes a strong option. Thirteen countries or jurisdictions have repealed their estate or inheritance taxes since 2000.
  • Repeal of the U.S. estate tax would gradually increase the U.S. capital stock by 2.2 percent, boost GDP, create 139,000 jobs, and eventually increase federal revenue.

Tax Freedom Day® 2015 is April 24th

April 2, 2015 Comments off

Tax Freedom Day® 2015 is April 24th
Source: Tax Foundation

Key Findings

  • This year, Tax Freedom Day falls on April 24, or 114 days into the year.
  • Americans will pay $3.3 trillion in federal taxes and $1.5 trillion in state and local taxes, for a total bill of more than $4.8 trillion, or 31 percent of the nation’s income.
  • Tax Freedom Day is one day later than last year due mainly to the country’s continued steady economic growth, which is expected to boost tax revenue especially from the corporate, payroll, and individual income tax.
  • Americans will collectively spend more on taxes in 2015 than they will on food, clothing, and housing combined.
  • If you include annual federal borrowing, which represents future taxes owed, Tax Freedom Day would occur 14 days later on May 8.
  • Tax Freedom Day is a significant date for taxpayers and lawmakers because it represents how long Americans as a whole have to work in order to pay the nation’s tax burden.
Categories: Tax Foundation, taxation

State Inflation-Indexing of Gasoline Taxes

December 4, 2014 Comments off

State Inflation-Indexing of Gasoline Taxes
Source: Tax Foundation

We’ve been asked which states adjust their gasoline tax for inflation. Most states (and the federal government) define their gas tax in so many cents per gallon, which can make a difference as time passes and inflation erodes the purchasing power of that tax rate. For example, the federal motor fuels tax today generates one-third fewer dollars in real terms since 1993, when it was last increased. Inflation-adjusting your gasoline tax can prevent this, although it also means you’re writing automatic tax increases into law.

3 states adjust their gasoline tax for inflation based on the Consumer Price Index: Florida, Maryland (effective 1/1/13), and New Hampshire (effective 7/1/14). Massachusetts will begin doing so on 1/1/15, assuming it is not repealed by voters in November. Maine formerly adjusted for CPI but repealed that effective 1/1/12.

4 additional states and DC adjust some portion of their gasoline tax for the wholesale price of gasoline: Kentucky, North Carolina, Virginia, West Virginia, and the District of Columbia.

1 additional state adjusts the gasoline tax for state transportation revenue needs: Nebraska.

Additionally, some states collect their sales tax in whole or in part on gasoline purchases: Hawaii, Illinois, Indiana, and Michigan. California applies a partial “sales tax” on gasoline on the wholesale price. New York collects local sales taxes on gasoline.

See also: Map of State Gasoline Tax Rates in 2014

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.

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.
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