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Topic:   Corporate, Business Taxation

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The Relationship Between Taxes and Growth at the State Level: New Evidence (Research Report)
William G. GaleAaron KrupkinKim Rueben

The effects of state tax policy on economic growth, entrepreneurship, and employment remain controversial. Using a framework that in prior research generated significant, negative, and robust effects of taxes on growth, we find that neither tax revenues nor top income tax rates bear stable relations to economic growth or employment across states and over time. While the rate of firm formation is negatively affected by top income tax rates, the effects are small in economic terms. Our results are inconsistent with the view that cuts in top state income tax rates will automatically or necessarily generate growth.

Published: 05/01/15
Availability:   PDF

Tax Reform and Small Business (Testimony)
Eric Toder

Eric Toder testified about tax reform and small business, before the House Committee on Small Business on April 15, 2015.

Published: 04/15/15
Availability:   PDF

How Much Do Taxes Affect Startup Investment Incentives? (Commentary)
Donald MarronJoseph Rosenberg

In a contribution to the Policy Dialogue on Entrepreneurship blog of Joseph Rosenberg and Donald Marron examine how tax policy affects investment incentives for startup companies. Startups often make losses, and thus cannot make immediate use of the R&D tax credit, accelerated depreciation, and other tax benefits. The value of those benefits declines the longer startups have to wait to use them. This puts startups and fast-growing young firms at a disadvantage relative to established companies.

Published: 03/18/15
Availability: HTML

Composition of Income Reported on Tax Returns in 2012 (Article/Tax Facts)
Lydia AustinRoberton Williams

As income increases, the composition of income changes substantially. For most taxpayers, salaries and wages contribute the most. But higher-earners typically report income from capital gains and businesses.

Published: 03/02/15
Availability:   PDF

Tax Policy and Investment by Startups and Innovative Firms (Research Report)
Joseph RosenbergDonald Marron

Our tax system imposes widely varying tax rates on investments in different activities, favors debt over equity, and favors pass-throughs over corporations. Targeted tax incentives can lower the cost of capital for small businesses, startups, and those that invest in intellectual property. But those advantages are weakened, and sometimes eliminated, because businesses that invest in new ideas rely more on higher-taxed equity than do firms that focus on tangible investment and because startups are often limited in their ability to use tax deductions and credits. These limits can more than offset the benefit from tax incentives.

Published: 02/09/15
Availability:   PDF

Distributional Effects of the President's New Tax Proposals (Research Report)
Leonard E. BurmanNgan Phung

The White House announced a package of tax proposals as part of what President Obama called “Middle Class Economics” in the State of the Union Address. This paper summarizes and discusses TPC’s distributional estimates, focusing on the distribution of all income tax cuts, the major tax cut provisions, and the largest tax increase provisions including the new fee on financial institutions. The tax cuts primarily benefit low-income single workers and working age households with children. The income tax increases primarily affect those with very high incomes and those with a substantial amount of capital assets.

Published: 01/30/15
Availability:   PDF

Lessons the United States Can Learn From Other Countries' Territorial Systems for Taxing Income of Multinational Corporations (Research Report)
Rosanne AltshulerStephen ShayEric Toder

The United States has a worldwide system that taxes the dividends its resident multinational corporations receive from their foreign affiliates, while most other countries have territorial systems that exempt these dividends. This report examines the experience of four countries – two with long-standing territorial systems and two that have recently eliminated taxation of repatriated dividends. We find that the reasons for maintaining or introducing dividend exemption systems varied greatly among them and do not necessarily apply to the United States. Moreover, classification of tax systems as worldwide or territorial does not adequately capture differences in how countries tax foreign-source income.

Published: 01/21/15
Availability:   PDF | Order this title online at Hopkins Fulfillment Services

Changes in Income Reported on Federal Tax Returns (Article/Tax Facts)
Roberton WilliamsLydia Austin

The composition of reported income has changed markedly since 1952. Investment income has continued to grow, along with business income, interrupted only by periodic economic downturns. Meanwhile, salaries and wages have declined as a share of income.

Published: 01/07/15
Availability:   PDF

Professor Shay Got It Right: Treasury Can Slow Inversions (Article/Tax Notes Viewpoints)
Steven Rosenthal

In a recent Tax Notes article, Shay argued that Treasury could write regulations to reduce the tax incentives for U.S. corporations to expatriate. Rosenthal agrees with Shay and analyzes the legal support for regulations under section 385.

Published: 09/30/14
Availability:   PDF

Flow-Through Business Income as a Share of AGI (Article/Tax Facts)
Joseph Rosenberg

This Tax Fact documents the increasing share of flow-through business income as a percentage of adjusted gross income (AGI) reported on individual income tax returns. In 2012, net income from sole proprietorships, partnerships, and S corporations totaled nearly $840 billion and accounted for more than 9 percent of total AGI.

Published: 09/29/14
Availability:   PDF

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