August 20, 2008
What's New?
With the United States facing a "quadruple threat" of negative economic indicators—a stock market in decline, a housing market in decline, seven months of increasing unemployment, and high gas and food prices—and with a public concerned that the country is trending toward a recession, the Tax Foundation today launched its CompeteUSA campaign to raise the public's awareness of America's high business tax rates and how those taxes have a "real-wallet" impact on our competitiveness, wages, and living standards.
As part of this look at the "real-wallet" impact of business taxes, the CompeteUSA campaign will also talk about how the American worker shoulders a disproportionate amount of the corporate tax, and the fact that the poorest 20 percent of households pay more in corporate income taxes each year than they pay in individual income taxes. In fact, corporate taxes were 6.3 percent of low-income households' tax bills last year compared to just 4 percent for individual income taxes.
The CompeteUSA webpage contains data, studies, blog posts, commentaries, podcasts, offers for free publications, and even a corporate tax IQ quiz.
Click here to view the page. Click here for the news release.
The Tax Foundation, in a friend-of-the-court brief filed with the Indiana Supreme Court, urges the reversal of a lower court decision creating a judicially enforceable right to a "quality" education. The brief explains that such an interpretation goes beyond the text and historical meaning of the Education Clause of the Indiana Constitution, focuses improperly on funding as the only way to improve state education, and ignores the problematic experiences other states have had with judicial funding mandates.
Read the amicus brief. Read the Tax Foundation Fiscal Fact on the brief. Read the news release. More on tax law here.
In a Tax Foundation Fiscal Fact released today, Robert Carroll, the Foundation's Vice President for Economic Policy, examines tax relief proposals from Sen. John McCain and Sen. Barack Obama. With the economy as one of the top issues among the American electorate this presidential election cycle, both candidates have been using the issues of health care, gas prices, and housing devaluation, among others, to preface their economic proposals. But Carroll explains that the candidates have significantly different tax policies that address these issues.
"Senator Obama has included a set of carefully targeted tax proposals that narrowly aim benefits to specific types of taxpayers, while Senator McCain provides broad tax relief with benefits that are indirect," says Carroll. "In both cases, tax relief is provided to the vast majority of the electorate."
Read the Tax Foundation Fiscal Fact. Read the news release. More on the presidential candidates' tax plan.
Tax Foundation President Scott Hodge this morning released the latest Tax Foundation Fiscal Fact in response to a new study from the Organisation for Economic Co-Operation and Development (OECD). The OECD study shows that for the 17th consecutive year, the average rate of corporate taxes in non-U.S. countries fell while the U.S. corporate tax rate stayed the same.
As a result of the U.S. failure to lower its corporate tax rate for more than two decades while other major trading nations lowered theirs, the U.S. corporate tax rate is now 50% higher than the OECD average. Nine key trading partners cut their rates during 2007.
"Continued failure by U.S. tax policymakers to keep up with our top global economic competitors means that we're solidifying a trend that will result in our children and grandchildren not seeing the economic growth we've seen in our lifetimes," noted Hodge. "There's a real-wallet impact for Americans as we continue to sit idly by while other countries improve the way they do business, and we should be very concerned about jobs, capital, and investments moving from high-tax countries to low-tax countries."
Read the Tax Foundation Fiscal Fact. Read the press release. Related data: National and State Corporate Income Tax Rates, U.S. and OECD Countries, 2008
An AP article today on the GAO's new report on corporate tax liabilities contains a serious error that undermines the story's thesis. The AP reported that, according to the GAO study comparing tax liabilities of corporations from 1998-2005, "about 25 percent of the U.S. corporations not paying corporate taxes [in 2005] were considered large corporations, meaning they had at least $250 million in assets or $50 million in receipts." Furthermore, this claim was repeated in numerous stories.
After careful review of the AP's story, Tax Foundation economist Josh Barro found that the AP significantly overstated the number of large corporations not paying corporate taxes.
"The actual report reflects that, of the 1.26 million U.S. corporations with no 2005 tax liability, just 3,565 were large," says Barro. "That's 0.28%, which is 90 times less than the figure reported by the AP. Policymakers and the public should not be deceived by this story that misrepresents the GAO report."
Click here to read the rest. Click here for more on corporate taxes.
New Jersey taxpayers bear the heaviest state-local tax burden in 2008, and Alaskans have the lightest tax burden, according to a new report from the Tax Foundation. In Tax Foundation Special Report, No. 163, "State-Local Tax Burdens Dip As Income Growth Outpaces Tax Growth," senior economist Gerald Prante computes each state's combined state-local tax burden, accounting for taxes paid out of state.
The nation as a whole paid 9.7% of its income in state-local taxes, down from 9.9% in 2007 primarily because income grew faster than tax collections between 2007 and 2008. New Jersey residents paid 11.8%, topping the charts. New Yorkers were close behind, paying 11.7%, and Connecticut was third at 11.1%. The top ten were rounded out by Maryland (10.8%), Hawaii (10.6%), California (10.5%), Ohio (10.4%), Vermont (10.3%), Wisconsin (10.2%) and Rhode Island (10.2%).
Read the full report. View the data by state or by year. Click here for details on each state's tax system.
