Are carbon taxes in our future? President Obama unveiled strong new rules to reduce carbon emissions this week. States could use pollution trading or “fees” (“carbon taxes”) to help meet their emission cutting requirements. Would it work? Brookings Institution economist Adele Morris told The National Journal that “States can not only comply with the new rule, they can also solve fiscal shortfalls and accomplish pro-growth tax reform.” Learn more about the carbon tax in this TPC paper by Donald Marron, Eric Toder and Lydia Austin.
The soda tax goes flat in Alabama. Governor Robert Bentley included a 5-cent-per-12-ounce tax on sugary drinks in his special session proclamation, but the Alabama House did not include it among 47 bills introduced this week. The Governor included the soda tax as an alternative to his proposal to eliminate the state’s income tax deduction for Social Security taxes paid. Either option could raise about $182 million a year to help offset the transfer of $225 million from the state’s Educational Trust Fund to its General Fund. The soda tax faced more political obstacles, and the House chose its alternative.
The safety net is stronger, thanks to federal and state income tax systems. A new research report by TPC’s Elaine Maag uses the Urban Institute’s Net Income Change Calculator to demonstrate how and why. Maag shows that in 2008, a single parent of two who worked full time at the minimum wage could have received nearly $5,800 in federal tax credits, plus a $900 special rebate recovery credit available that year. State credits could have added up to $4,000. By contrast, combined benefits from TANF and SNAP would have varied from just over $3,200 to $9,400, depending on where she lived.
Who claims the Research and Experimentation Credit? The R&E tax credit is one of the largest of the many expired tax breaks up for renewal this fall. In 2012, corporations claimed $10 billion in credits. In a new Tax Fact, TPC’s Joe Rosenberg illustrates three facts about the R&E credit. In a nutshell: Most of the credit goes to firms with more than $250 million in annual receipts and to firms in the manufacturing sector, and most of the qualified research expenses are wages.
The IRS seeks public comment on the “Cadillac Tax.” The 40 percent tax on high-cost health insurance plans goes into effect in 2018. The IRS will issue proposed regulations once it has considered comments, which can be emailed to Notice.comments “at” irscounsel.treas.gov (use “Notice 2015-52″ in the subject). Comments must be submitted by October 1.
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- © Urban Institute, Brookings Institution, and individual authors, 2016.