Tax Foundation - Press Room

Those Hit by Health Care Surtax Would Pay 36% of Federal Income Taxes

Thu, 05 Nov 2009 00:00:00 EST

Surtax Would Affect 0.3% of All Tax Returns, Which Are Responsible for 14% of AGI

Washington, DC, November 5, 2009 -- A popular defense of the proposed 5.4 percent surtax on high-income people to fund House Speaker Nancy Pelosi's health care reform plan is that it would only affect 0.3 percent of all tax returns. An analysis by the Tax Foundation shows that this small group earns about 14 percent of the nation's adjusted gross income (AGI), and would foot 36 percent of the entire federal individual income tax bill in 2011.

This assumes expiration of the Bush tax cuts for high-income returns, which would push the top two federal individual income tax rates from 33 percent to36 percent and from 35 percent to 39.6 percent, along with other tax increases. This is compared to the remaining 99.7 percent of tax returns, which earn 86 percent of AGI and would be paying 64 percent of all federal individual income taxes, according to Tax Foundation calculations.

"While the number of tax returns that would be hit by the health care surtax is relatively small, these tax returns make up a significant fraction of income and pay a disproportionate share of the current tax bill," Tax Foundation Senior Economist Gerald Prante explained in a blog post (http://www.taxfoundation.org/blog/show/25465.html) that includes a chart detailing share of income and tax burden borne by "surtax returns" and "non-surtax returns."

The proposed surtax of 5.4 percent would be levied on joint returns with AGI over $1 million and single returns with AGI over $500,000. Even if the surtax is not enacted, the top 0.3 percent of tax returns would pay 32 percent of all federal individual income taxes, assuming the Bush tax cuts for high-income returns expire. The remaining "non-surtax returns" would pay 68 percent.

If all the Bush tax cuts are extended and the surtax is not enacted, the 0.3 percent of tax returns that would have been hit would be responsible for 28 percent of the income tax bill, compared to the 72 percent footed by the rest of the returns.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

New House Health Care Plan Funded By Income Surtax, Medicare Cuts

Fri, 30 Oct 2009 00:00:00 EDT

Tax Foundation Report Breaks Down Financing of $1.05 Trillion House, $829 Billion Senate Health Care Reform Plans

Washington, DC, October 30, 2009 -- The $1.05 trillion House health care reform legislation unveiled by Speaker Nancy Pelosi yesterday is financed primarily through net cuts to Medicare (which would save $472.8 billion, or 39 percent of the bill's 10-year cost), and a 5.4 percent surtax on high-income individuals (which would generate $460.5 billion, or 38 percent of the bill's cost), according to the Tax Foundation's review of the Congressional Budget Office's (CBO) analysis.

By comparison, nearly half of the $829 billion Senate Finance Committee plan is financed through Medicare cuts ($377.8 billion, or 41 percent of the bill's 10-year cost), and 22 percent would come from an excise tax on so-called "Cadillac" health insurance plans, which would raise an estimated $201.4 billion over 10 years. The House plan would reduce the deficit by $104 billion and the Senate version by $81 billion.

"There are similarities and major differences between the House and Senate plans: Both rely on Medicare spending cuts, although the House plan would cut nearly $100 billion more, and both plans include one large new tax - a high-income surtax in the House version and a tax on high-value health insurance plans in the Senate version," said Tax Foundation Senior Economist Gerald Prante, who authored Tax Foundation Fiscal Fact No. 200, "Comparing Financing of the House and Senate Health Care Reform Plans." The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/25456.html.

"Both the House and Senate proposals would impose a financial penalty on individuals if they do not buy health insurance, and both would force employers to pay a penalty to either the government or new 'health exchanges' if they do not provide a government-approved health insurance plan to employees," Prante said. "In both cases, the House penalty is higher."

In the House plan, these "pay or play" provisions for employers make up the next largest percentage ($135 billion, or 11 percent) of the legislation's financing, followed by a tax on medical devices and other health care revenue increases ($55 billion, or 5 percent), corporate income tax increases and other non-health revenues ($50.4 billion, or 4 percent) and a penalty on uninsured individuals ($33 billion, or 3 percent).

In the Senate Finance Committee plan, a tax on medical devices and other health care revenue increases make up the next largest financing percentage ($179.1 billion, or 20 percent), followed by corporate income tax increases and other non-health revenues ($100.1 billion, or 11 percent), net cuts to other health care spending ($26.3 billion, or 3 percent), "pay or play" provisions for employers ($23 billion, or 3 percent) and a penalty on uninsured individuals ($4 billion, or less than 1 percent).

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Fiscal Fact No. 200 "Comparing Financing of the House and Senate Health Care Reform Plans," is available online at http://www.taxfoundation.org/publications/show/25456.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

New Report Highlights State and Local Government Spending Priorities

Thu, 29 Oct 2009 00:00:00 EDT

Census Data Show What States Spend on Education, Public Welfare, Hospitals, Other Services

Washington, DC, October 29, 2009 -- Based on recently released Census data, a new Tax Foundation report reveals state and local government spending priorities.

State and local government spending is broken down for nine specific functional categories and a miscellaneous catch-all: K-12 education, higher education, public welfare, hospitals and health, transportation, public safety, environment and housing, government administration, interest on debt and other. In each category, the percentage of total spending is shown so that state priorities can be compared whether combined state and local budgets are comparatively large or small.

"Earlier this month, we released a report looking at Census data on state and local government revenue sources, and this new spending information completes the picture of state and local government finances," said Tax Foundation Senior Economist Gerald Prante, who authored Tax Foundation Fiscal Fact No. 199, "Where Do State and Local Governments Concentrate Their Spending?"

The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/25452.html and includes the most recent state and local finance data from the Census Bureau, for fiscal year 2007.

"Combined state-local data is best for interstate comparison because what some states accomplish with local spending is accomplished in other states with state-level programs," Prante noted.

The states that concentrate their spending on K-12 education are, from 1 to 10, New Jersey (31.8%), New Hampshire (28.6%), Texas (28.0%), Connecticut (27.7%), Michigan (27.2%), Virginia (26.9%), Georgia (26.8%), Arkansas (26.0%), Vermont (25.2%) and Maryland (25.2%). The national average is 23.9%.

The states that concentrate spending on higher education are, from 1 to 10, Utah (15.5%), North Dakota (15.4%), North Carolina (14.2%), Vermont (13.7%), Iowa (13.2%), Alabama (13.2%), Kansas (13.0%), Oklahoma (12.6%), Arkansas (12.3%) and New Mexico (12.2%). The national average is 9.1%.

The states that spend the highest percentage on public welfare are, from 1 to 1, Maine (24.3%), Rhode Island (23.7%), Minnesota (22.8%), Vermont (22.7%), Pennsylvania (21.7%), Massachusetts (21.7%), New York (21.6%), Arkansas (21.4%), Kentucky (21.2%) and Tennessee (20.8%), compared to the national average of 16.8%.

The states that concentrate spending on health and hospitals are, from 1 to 10, South Carolina (15.9%), Wyoming (15.2%), Alabama (14.7%), Mississippi (13.6%), North Carolina (12.9%), Tennessee (12.2%), Iowa (12.1%), Washington (11.6%), Georgia (10.6%) and Missouri (10.5%). The national average is 8.4%.

The states that spend the highest percentage on transportation are, from 1 to 10, South Dakota (15.8%), Alaska (15.6%), North Dakota (14.2%), Montana (12.2%), Nevada (12.2%), Georgia (11.5%), Wyoming (10.8%), Idaho (9.7%), Kentucky (9.6%) and Washington (9.5%). The national average is 7.6%.

The states that spend the highest percentage on public safety are, from 1 to 10, Nevada (13.6%), Arizona (12.2%), California (12.0%), Florida (11.2%), Maryland (10.5%), Oregon (10.4%), Colorado (10.0%), Rhode Island (9.8%), Virginia (9.7%) and Illinois (9.0%), compared to the national average of 9.1%.

The states that concentrate spending on the environment and housing are, from 1 to 10, Louisiana (15.1%), Florida (11.1%), Washington (9.7%), Hawaii (9.6%), South Dakota (9.3%), California (9.3%), Oregon (9.1%), Arizona (9.1%), Colorado (9.0%) and Maryland (8.9%), compared to the national average of 7.7%.

The states that concentrate spending on government administration are, from 1 to 10, Delaware (8.6%), Nevada (7.8%), Utah (7.8%), Montana (7.4%), Alaska (7.1%), West Virginia (7.0%), Rhode Island (6.9%), Colorado (6.9%), California (6.7%) and Oregon (6.6%). The national average is 5.3%.

Finally, the states that spend the highest percentage on debt interest are, from 1 to 10, Massachusetts (7.4%), Hawaii (5.6%), New Hampshire (5.5%), Rhode Island (5.3%), Illinois (5.3%), Texas (5.1%), Connecticut (5.1%), Colorado (5.1%), Kentucky (4.9%) and Pennsylvania (4.9%). The national average is 4.1%.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Fiscal Fact No.199, "Where Do State and Local Governments Concentrate Their Spending?" is available online at http://www.taxfoundation.org/publications/show/25452.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Treasury Veterans and Business Leaders Eric Solomon, John Samuels to be Honored for Sound Tax Policy Work

Wed, 28 Oct 2009 00:00:00 EDT

Tax Foundation to Present Distinguished Service Awards to Principal in Ernst & Young LLP's National Tax Department, GE Vice President and Senior Counsel

Washington, DC, October 28, 2009 -- The Tax Foundation will present its Distinguished Service Awards to Eric Solomon, who served in the U.S. Treasury Department as Assistant Secretary (Tax Policy) from December 2006 to January 2009, and John Samuels, former Treasury Department Deputy Tax Legislative Counsel and Tax Legislative Counsel from 1976-1981.

The awards will be presented at the Tax Foundation's Annual Dinner celebrating the 72^nd anniversary of its founding on Thursday, November 19, 2009, at the Four Seasons Hotel, 2800 Pennsylvania Avenue NW, Washington, DC. The reception begins at 6 p.m., and dinner starts at 7 p.m.

Solomon has more than 30 years of tax experience in private practice and government service. As a principal in Ernst & Young LLP's National Tax Department in Washington, DC, he advises clients on a wide range of transactional and tax policy issues. Solomon joined the Office of Tax Policy in 1999 and served as Senior Advisor for Policy, Deputy Assistant Secretary (Tax Policy) and Deputy Assistant Secretary (Regulatory Affairs) prior to his confirmation as Assistant Secretary. In recognition of his accomplishments as a Treasury executive, Solomon received the Distinguished Executive Presidential Rank Award, as well as the Alexander Hamilton Award, the highest award for service to the Treasury Department. He previously served as Assistant Chief Counsel (Corporate) at the IRS, heading the IRS legal division responsible for all corporate tax issues. Prior to his service and the U.S. Treasury Department, Solomon was a principal in Ernst & Young LLP's National Tax Mergers and Acquisitions Group in Washington, DC. Prior to his service at the IRS, he was a partner in the law firm of Drinker, Biddle & Reath in Philadelphia. He is an adjunct professor at Georgetown University, where he teaches a course in corporate taxation. He is also a Fellow of the American College of Tax Counsel.

As Vice President and Senior Tax Counsel for GE, Samuels is responsible for GE's worldwide tax organization and for the company's global tax planning, tax policy, and tax compliance operations. Samuels joined GE in 1988, and over the past 20 years has helped build GE's widely respected global tax organization, which now has almost 1,000 tax experts located in more than 20 countries around the world. He is a member of GE's Corporate Executive Council, the GE Capital Corporation Board of Directors and the GE Pension Board. He is Chairman of the International Tax Policy Forum, a Fellow of the American College of Tax Counsel, and a member of the University of Chicago Law School Visiting Committee. In recognition of his role in formulating U.S. tax policy while at the Treasury Department, Samuels received the Exceptional Service Award. Prior to joining GE, Samuels was a partner in the law firm of Dewey, Ballantine in Washington, D.C. and New York City. Samuels is currently a Visiting Lecturer at Yale Law School, where he teaches courses in international taxation.

"Eric and John are two of the most respected individuals in the tax profession today and have made a lasting impact in the field of tax policy," Tax Foundation President Scott Hodge said. "While at Treasury, Eric was a stalwart defender of sound tax policy and worked tirelessly to make the U.S. more competitive in the global economy. With his reputation for fairness and integrity, Eric earned the respect of everyone in the tax community on both sides of the aisle."

"John's leadership in facilitating a rational debate on international tax policy is without peer," Hodge continued. "Through his work with the International Tax Policy Forum in particular, John has fostered a body of economic research that continues to shape our understanding of how tax policy affects global business, economies, and living standards."

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

New Census Data: From 2006 to 2008, NY, NJ Counties Rank Highest in Property Taxes on Homeowners

Wed, 28 Oct 2009 00:00:00 EDT

American Community Survey Data Now Includes Three-Year Averages for Counties with Populations over 20,000

Washington, DC, October 28, 2009 -- Census Bureau data released yesterday show that over a three-year period (2006, 2007 and 2008), homeowners in New York and New Jersey counties paid the most in property taxes, while those in Louisiana parishes paid the least. In seven New Jersey counties and three New York counties, the median property tax over 2006-2008 is more than 7 percent of median household income, compared to the national median of 2.85%.

In Tax Foundation Fiscal Fact No. 198, "New Jersey and New York Counties Rank Highest in Property Tax, Louisiana Parishes Lowest," Tax Foundation Senior Economist Gerald Prante uses newly updated data from the 2008 American Community Survey to rank counties with populations greater than 20,000 according to various property tax measures. "The data released today includes property tax estimates on a three-year average for places with populations that exceed 20,000," Prante said. "This differs from what Census released late last month, which includes single-year figures for counties with populations over 65,000."

The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/25434.html.

The top 10 counties in median real estate taxes paid over 2006-2008 are, from 1 to 10, Westchester County, NY ($8,404); Hunterdon County, NJ ($8,347); Nassau County, NY ($8,306); Bergen County, NJ ($7,997); Rockland County, NY ($7,798); Essex County, NJ ($7,676); Somerset County, NJ ($7,676); Morris County, NY ($7,310); Passaic County, NJ ($7,095); and Union County, NJ ($7,058). The national median is $1,854.

The top 10 counties in median real estate taxes as a percentage of home value over 2006-2008 are (all from the state of New York), from 1 to 10, Orleans County (3.04%), Niagara County (2.95%); Allegany County (2.92%); Monroe County 2.89%); Wayne County (2.85%); Montgomery County (2.75%); Genesee County (2.73%); Cortland County (2.71%); Chautauqua County (2.66%); and Seneca County (2.65%). The national median is nearly 1% (0.96%).

The top 10 counties in median real estate taxes as a percentage of homeowner income over 2006-2008 are, from 1 to 10, Passaic County, NJ (8.34%); Essex County, NJ (8.12%); Nassau County, NY (8.00%); Bergen County, NJ (7.89%); Union County, NJ (7.80%); Rockland County, NY (7.61%); Westchester County, NY (7.55%); Hunterdon County, NJ (7.50%); Suffolk County, NY (7.24%); and Hudson County, NJ (7.20%). The national median is 2.85%.

The bottom 10 counties in median real estate taxes paid over 2006-2008 are (all from Louisiana), from highest to lowest amount, De Soto Parish ($129); Evangeline Parish ($127); Jefferson Davis Parish ($127); Webster Parish ($125); Sabine Parish ($124); Richland Parish ($122); Avoyelles Parish ($120); Vernon Parish ($120); Allen Parish ($119); and Franklin Parish ($117).

The bottom 10 counties in median real estate taxes as a percentage of home value over 2006-2008 are (also all from Louisiana), from highest to lowest percentage, Livingston Parish (0.15%); Terrebonne Parish (0.14%); Avoyelles Parish (0.14%); West Baton Rouge Parish (0.14%); Assumption Parish (0.14%); St. James Parish (0.14%); Lafourche Parish (0.14%); Tangipahoa Parish (0.12%); St. John the Baptist Parish (0.11%); and St. Bernard Parish (0.11%).

The bottom 10 counties in median real estate taxes as a percentage of homeowner income over 2006-2008 are (also all from Louisiana), from highest to lowest percentage, Lafourche Parish (0.28%); St. John the Baptist Parish (0.28%); De Soto Parish (0.28%); Jefferson Davis Parish (0.28%); Webster Parish (0.27%); Beauregard Parish (0.27%); Evangeline Parish (0.26%); Allen Parish (0.26%); Vermilion Parish (0.26%); and Vernon Parish (0.25%).

For a chart of real restate taxes paid on owner-occupied housing for each of the more than 1,800 countries with populations greater than 20,000 for the years 2006, 2007 and 2008, ranked by median real estate taxes paid, see http://www.taxfoundation.org/taxdata/show/25429.html. For the same information ranked by median real estate taxes as a percentage of home value, see http://www.taxfoundation.org/taxdata/show/25428.html.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Fiscal Fact No.198, "New Jersey and New York Counties Rank Highest in Property Tax, Louisiana Parishes Lowest," is available online at http://www.taxfoundation.org/publications/show/25434.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

To Close the Deficit, Federal Income Tax Rates Would Have to Nearly Triple

Thu, 22 Oct 2009 00:00:00 EDT

Federal Spending So High That Even Prohibitive Income Tax Hikes Would Not Balance Budget

Washington, DC, October 22, 2009 -- Federal income tax rates would have to be nearly tripled across the income spectrum if Congress were to close the deficit in fiscal year 2010, according to a new report from the nonpartisan Tax Foundation. Instead of taxing joint filers with rates ranging from 10 percent to 35 percent, tax rates would have to start at 27.2 percent and reach up to 95.2 percent.

"Federal government spending levels are so high that even if policymakers were willing to stop debt-financing government services, the federal tax system in its current form wouldn't be able to raise that much," said Tax Foundation Director of Policy and Communications Bill Ahern, who authored the report, "Can Income Tax Hikes Close the Deficit?" The paper is No. 197 in the Tax Foundation Fiscal Fact series and is available online at http://www.taxfoundation.org/publications/show/25415.html.

"If high-income people had to pay a federal tax rate over 90 percent, plus state and local income taxes and other taxes, total tax rates would be well over 100 percent for many households," he said.

If the federal government were determined to close the 2010 deficit, even resorting to higher income tax rates across the income spectrum, the average tax payment of someone making between $75,000 and $100,000 would jump from $7,055 to $20,515. Taxpayers with AGIs over $1 million would see their tax bills climb from $800,000 to almost $2 million.

Even in 2012, when the President's Budget projects a lower deficit, tax rates would still be need to be prohibitively high in order to balance the budget: nearly double, with rates ranging from 18.7 percent to 74.1 percent.

"Economists debate the extent to which modest tax rate increases persuade workers to work less and entrepreneurs to risk less, but there can be little doubt that the high tax rates necessary to balance the budget in the next several years would discourage all income-producing endeavors," Ahern said.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Fiscal Fact No. 197, "Can Income Tax Hikes Close the Deficit?" is available online at http://www.taxfoundation.org/publications/show/25415.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Tax Foundation Releases Updated Combined State and Local Sales Tax Rates

Fri, 16 Oct 2009 00:00:00 EDT

Tennessee, California Have Highest Combined State, Average Local Sales Tax Rates

Washington, DC, October 16, 2009 -- Tennessee, California, Washington state, Oklahoma and Louisiana have the highest combined state and average local sales tax rates, according to updated information released by the nonpartisan Tax Foundation today. On the other end of the scale, Delaware, Montana, New Hampshire and Oregon all have the lowest combined rates of 0 percent.

"Sales taxes are at the same time transparent and opaque," said Tax Foundation Staff Economist Kail Padgitt, Ph.D., who authored Tax Foundation Fiscal Fact No. 196, "Updated State and Local Option Sales Tax." "Taxpayers can easily see sales tax rates by looking at the receipt for any purchase, but depending on the locality in a specific state, there may be a variety of local option sales taxes in addition to the state rate." The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/25395.html.

The states with the highest combined state-local rates are Tennessee (9.41 percent), California (9.06 percent), Washington (8.78 percent), Oklahoma (8.44 percent) and Louisiana (8.43 percent). The states with the lowest non-zero combined rates are Alaska (1.61 percent), Hawaii (4.38 percent), Maine (5 percent), Virginia (5 percent), Wisconsin (5.42 percent) and Wyoming (5.42 percent).

Four localities in central Alabama have the dubious distinction of having the highest combined sales tax: Brookwood, Coaling, Coker and Vance all have a total sales tax rate of 11 percent, with 4 percent going to the state, 5 percent going to Tuscaloosa County and 2 percent to the city.

California has the highest statewide general sales tax rate of 8.25 percent (including a 1 percent mandatory "local" add-on rate), and six states tie for the second-highest rate of 7 percent: Indiana, North Carolina, Mississippi, New Jersey, Rhode Island and Tennessee. Colorado has the lowest non-zero statewide rate of 2.9 percent, followed by seven states with a 4 percent rate: Alabama, Georgia, Hawaii, Louisiana, New York, South Dakota and Wyoming.

The states with the highest average local sales tax rates are Louisiana (4.43 percent), Colorado (4.34 percent), New York (4.3 percent), Oklahoma (3.94 percent) and Georgia (3.02 percent). The states with the lowest non-zero average local rates are Pennsylvania (0.22 percent), Hawaii (0.34 percent), Minnesota (0.34 percent), Wisconsin (0.42 percent) and Utah (0.66 percent).

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Fiscal Fact No. 196, "Updated State and Local Option Sales Tax" is available online at http://www.taxfoundation.org/publications/show/25395.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Medicare Cuts in Baucus Health Plan Would Reduce Deficit Over 20 Years

Thu, 15 Oct 2009 00:00:00 EDT

Over 20 Years, Senate Finance Committee Bill is Deficit-Neutral Without Taxing "Cadillac" Health Insurance Plans

Washington, DC, October 15, 2009 -- A new analysis from the nonpartisan Tax Foundation has found that over a 20-year period, the health care bill written by Sen. Baucus and passed Tuesday by the Senate Finance Committee includes enough spending cuts in Medicare and other current government health programs to reduce the budget deficit over the long term. The study looked at the next 20 years.

CBO projects that cuts in Medicare and other health programs would save $404 billion between fiscal year 2010 and 2019, which when combined with the other provisions in the Baucus plan, including various tax hikes, would reduce the deficit by $81 billion. Assuming the savings from Medicare cuts continue growing at the same rate beyond 2019, savings could reach a total of $1.8 trillion over the next 10-year period, 2020-2029, for a total deficit reduction of up to $988 billion over 20 years, according to the Tax Foundation report.

"From 2020 to 2029, the spending cuts in Medicare combined with the proposed tax hikes far exceed the cost of new health benefits for working-age people, improving the deficit dramatically," said Tax Foundation Senior Economist Gerald Prante, who authored the report. "The savings from cuts to Medicare and other health care spending would be so significant down the road that Chairman Baucus's proposed excise tax on 'Cadillac' health plans would likely not even be necessary to pay for the plan."

Tax Foundation Fiscal Fact No. 195, "If Medicare Cuts Proposed in Baucus Plan Are to Be Believed, Long-Term Deficit Outlook Is Favorable," is available online at http://www.taxfoundation.org/publications/show/25379.html.

Using the CBO's 2019 growth rate, during which savings from cuts in Medicare and other health programs would grow by nearly 19 percent, instead of a more conservative savings growth rate results in even greater savings: about $2.7 trillion from 2020-2029, for a total deficit reduction of $1.9 trillion over 20 years.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Fiscal Fact No. 195, "If Medicare Cuts Proposed in Baucus Plan Are to Be Believed, Long-Term Deficit Outlook Is Favorable" is available online at http://www.taxfoundation.org/publications/show/25379.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

New Report Compares State and Local Government Tax Revenue Sources

Fri, 09 Oct 2009 00:00:00 EDT

States Rely Differently on Property, Sales, Income and Other Taxes, Census Data Shows

Washington, DC, October 9, 2009 -- Four New England states rank in the top 10 most reliant on property taxes, and four Mid-Atlantic states rank in the top 10 most reliant on individual income taxes. These are among the findings of newly released Tax Foundation data on various sources of state and local tax collections for fiscal year 2007, the latest Census data available for both states and localities.

"Each of the 50 states' fiscal systems vary widely, and they all rely on various sources of tax revenue due to different endowed resources and policy priorities," said Tax Foundation Senior Economist Gerald Prante, who authored Tax Foundation Fiscal Fact No. 194, "Where Do State and Local Governments Get Their Tax Revenue?" "States rich with natural resources, such as Alaska and Wyoming, depend heavily on those tax revenue sources, while states seeking a steeply progressive tax code tend to rely more on individual incomes taxes."

The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/25301.html. Combined state and local data is best for interstate comparison because what some states accomplish with local taxes, other states accomplish with state-level taxes, Prante noted.

The report lists the percentage of tax revenue coming from property, general sales, selective sales, individual income and corporate income taxes, as well as licenses and other taxes. The 10 states that rely most on property taxes are New Hampshire (61.3%), Vermont (42.1%), New Jersey (41.7%), Texas (41.6%), Rhode Island (41.1%), Michigan (39.3%), Connecticut (38.2%), Illinois (37.1%), Florida (36.8%) and Wyoming (36.8%).

The 10 states that depend heavily on general and selective sales taxes (levied on motor fuel, tobacco, insurance premiums, public utilities, amusements and alcoholic beverages) are Washington (62.1%), Nevada (58.2%), Tennessee (56.8%), South Dakota (54.1%), Arkansas (53.2%), Louisiana (53.0%), Hawaii (51.7%), Florida (49.0%), Arizona (48.4%) and Alabama (47.8%).

States that collect the highest percentage of revenue from individual income taxes include Oregon (44.1%), Maryland (39.7%), Massachusetts (35.6%), North Carolina (32.7%), New York (31.8%), Virginia (31.6%), California (30.8%), Minnesota (30.5%), Connecticut (30.0%) and Ohio (29.9%).

Fees for licenses (motor vehicle, business and hunting or fishing), severance taxes on natural resources, stock transfer taxes and estate or gift taxes are also major sources of tax revenue for some states. The 10 states that depend most heavily on these include Alaska (52.6%), Delaware (34.1%), Wyoming (30.1%), North Dakota (20.7%), Montana (18.8%), Oklahoma (17.8%), New Mexico (17.5%), Nevada (14.3%), Oregon (12.6%) and West Virginia (12.4%).

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Fiscal Fact No. 194, "Where Do State and Local Governments Get Their Tax Revenue?" is available online at http://www.taxfoundation.org/publications/show/25301.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

House Health Care Plan Would Push Income Redistribution to $1.4 Trillion

Tue, 06 Oct 2009 00:00:00 EDT

Middle-Income Families, Not Poor, Stand to Benefit the Most from Ways and Means Bill

Washington, DC, October 6, 2009 -- If H.R. 3200, the health care reform bill that cleared the House Ways and Means Committee, becomes law, an additional $122 billion would be redistributed from the top-earning 30 percent of the income spectrum, for a total income redistribution of about $1.4 trillion, according to new analysis from the nonpartisan Tax Foundation.

The biggest beneficiaries of HR 3200's redistribution would not be low-income families, but middle-class families, especially those making between $65,704 and $112,721, who would see an average benefit of about $1,900. In fact, even in the 60 percent to 70 percent income group, earning up to $141,101, the average family would gain almost $1,000.

"Families in the middle of the income spectrum would benefit the most - an average of about $1,900 per family - from the greater income redistribution embedded in the House health reform plan," said Tax Foundation President Scott Hodge, author of Number 193 in the Tax Foundation Fiscal Fact series, titled, "Distributional Effects of the House of Representatives' Health Care Reform Bill." The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/25271.html.

Among the highest earners, those in the top-earning 1 percent of families, the additional amount redistributed away from each family would be $88,729 in 2016, the first full year in which the health care legislation would be in effect.

Even without health care reform, families in the top-earning 10 percent will be redistributing more than $1 trillion down the income scale in fiscal year 2016.

Lower-income families would see their redistribution increase somewhat - by an average of about $595 per family for the bottom 10 percent.

The findings are the latest from the Tax Foundation's "fiscal incidence" project, a long-term research effort to include federal spending along with taxes in calculations of income redistribution.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Which States Are Best for Business? 2010 State Business Tax Climate Index

Tue, 22 Sep 2009 00:00:00 EDT

Tax Foundation Releases Annual Report on "Business-Friendliness" of State Tax Systems

Washington, DC, September 22, 2009 -- South Dakota has the most "business-friendly" tax system, and New Jersey has the least, according to the Tax Foundation's 2010 State Business Tax Climate Index released today. The Index measures the competitiveness of the 50 states' tax systems and ranks them accordingly based on the taxes that matter most to businesses and business investment: corporate income, individual income, sales, property and unemployment insurance taxes.

The states are scored on these taxes, and the scores are weighted based on the relative importance or impact of the tax to a business. Keeping a state competitive in today's global marketplace can be difficult, but there is one factor lawmakers have direct control over: the quality of state tax systems. The Index measures how well a state's tax system encourages investment by maintaining a broad tax base and low rates.

"When policymakers are considering tax changes in their states, they should remember two rules: Taxes matter to business, and states do not enact tax changes - increases or cuts - in a vacuum," said Kail Padgitt, Ph.D., who authored Tax Foundation Background Paper No. 59, "2010 State Business Tax Climate Index." The Index represents the tax climate of each state as of July 1, 2009, the first day of the standard 2010 fiscal year, and is available online at http://www.taxfoundation.org/research/show/22658.html.

The top 10 states in the 2010 Index, from 1st to 10th, are South Dakota, Wyoming, Alaska, Nevada, Florida, Montana, New Hampshire, Delaware, Washington and Utah. The bottom 10 states, from 41st to 50th, are Vermont, Wisconsin, Minnesota, Rhode Island, Maryland, Iowa, Ohio, California, New York and New Jersey.

Oklahoma saw the biggest drop in ranking this year - from 19th in 2009 to 31st in 2010 - due not to legislative changes, but to the fact that the Tax Foundation was able to obtain much more detailed nationwide data on local-option sales taxes, which are much higher in Oklahoma than in most states (above 4 percent in several municipalities).

Kentucky's ranking improved the most - up 14 spots from 34th in 2009 to 20th in 2010. Many economically damaging changes were enacted in other states that previously ranked better than Kentucky - especially in the personal income tax - so other states' rankings fell while Kentucky remained stable.

Other tax changes that affected states' rankings include enactment of so-called "millionaires' taxes" on high-income earners (often on income far less than $1 million) in states such as Hawaii, New Jersey and Oregon. New Jersey remained dead last, as it was in the 2009 Index, and Hawaii and Oregon dropped in rank by two spots to 24th and six spots to 14th, respectively. Ten states also enacted cigarette tax increases this year: Arkansas, Florida, Hawaii, Kentucky, Mississippi, New Jersey, New Hampshire, Rhode Island, Vermont and Wisconsin.

Tax Foundation Background Paper No. 59, "2010 State Business Tax Climate Index," is available online at http://www.taxfoundation.org/research/show/22658.html. The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Census Survey: Northeast and Parts of Midwest Continue to Rank Highest in Property Taxes on Homeowners

Tue, 22 Sep 2009 00:00:00 EDT

New York, New Jersey Counties See Highest Taxes Paid By Dollar Amount, Percentage of Home Value

Washington, DC, September 22, 2009 - New data released today by the Census Bureau on owner-occupied housing shows Northeast homeowners and select states in the Midwest tend to pay the most in property taxes with the highest counties being in New York and New Jersey. Louisiana and much of the South tend to have the lowest property taxes on homeowners.

In Tax Foundation Fiscal Fact No. 192, "New Census Data on Property Taxes on Homeowners," Tax Foundation Senior Economist Gerald Prante uses newly updated data from the 2008 American Community Survey to rank high-population counties across the country according to various property tax measures. "In the county rankings, there has been little change from the 2007 numbers, where the Northeast, specifically New York and New Jersey, dominated the highest-taxed counties," Prante observes.

The top 10 counties in median real estate taxes paid for 2008 are, from 1 to 10, Westchester County, NY ($8,890); Nassau County, NY ($8,628); Hunterdon County, NJ ($8,492); Bergen County, NJ ($8,446); Rockland County, NY ($8,430); Essex County, NJ ($7,924); Somerset County, NJ ($7,743); Morris County, NJ ($7,557); Passaic County, NJ ($7,370); and Putnam County, NY ($7,324). The national median is $1,897.

The top 10 counties in median real estate taxes as a percentage of median home value for 2008 are all from the state of New York, from 1 to 10, Niagara County (2.89%); Monroe County (2.85%); Wayne County (2.82%); Chautauqua County (2.60%); Cayuga County (2.54%); Cattaraugus County (2.52%); Onondaga County (2.51%); Erie County (2.48%); Oswego County (2.42%); and Chemung County (2.38%). The national median is nearly 1 percent (0.96%).

"Among states, the story is much the same as for the top counties: The Northeast area of the country has the highest property taxes, along with pockets elsewhere, such as Wisconsin, Texas, Nebraska, and Illinois," Prante said.

The top 10 states in median real estate taxes paid for 2008 are, from 1 to 10, New Jersey ($6,320); Connecticut ($4,603); New Hampshire ($4,501); New York ($3,622); Rhode Island ($3,534); Massachusetts ($3,406); Illinois ($3,384); Vermont ($3,281); Wisconsin ($2,963); and California ($2,829). The top 10 states for median real estate taxes as a percentage of median home value are Texas (1.76%); New Jersey (1.74%); Nebraska (1.72%); Wisconsin (1.71%); New Hampshire (1.70%); Illinois (1.57%); Vermont (1.53%); Connecticut (1.50%); Michigan (1.45%); and North Dakota (1.41%).

Fiscal Fact No. 192 can be found at: http://www.taxfoundation.org/news/show/25197.html. See the full county list, ranked by property taxes paid, online at http://www.taxfoundation.org/taxdata/show/23649.html. See the full county list, ranked by taxes as a percentage of home value, online at http://www.taxfoundation.org/taxdata/show/1888.html. See the list by state online at http://www.taxfoundation.org/taxdata/show/1913.html.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Tax Foundation Announces New State Government Data, Research on Website

Mon, 21 Sep 2009 00:00:00 EDT

Nonpartisan Research and Educational Organization Unveils Information on State and Local Government Employee Pensions, Compensation

Washington, DC, September 28, 2009 - "Since our founding in 1937, the Tax Foundation has been looked to for principled data, research, and analysis of tax issues at all levels of government, including important projects such as Tax Freedom Day, State-Local Tax Burdens, State Business Tax Climate Index and Facts & Figures," Tax Foundation President Scott Hodge said. "We are therefore pleased to be expanding the resources on our website with additional information on state budgets and state government operations."

The information is organized into four general categories: State and Local Government Units (http://www.taxfoundation.org/taxdata/topic/138.html), State and Local Government Employee Retirement Systems (http://www.taxfoundation.org/taxdata/topic/141.html), Public vs. Private Sector Compensation (http://www.taxfoundation.org/taxdata/topic/139.html) and State and Local Government Employees and Pay, by Function (http://www.taxfoundation.org/taxdata/topic/140.html). Tax Foundation Fiscal Fact No. 191, "New Data and Research on State Governments on Tax Foundation Website," details more information about each section and may be found online at http://www.taxfoundation.org/publications/show/25205.html.

The section on state and local government units includes statistics on important and often overlooked state and local government entities—89,476 of them to be exact, which together collected $768 billion in fiscal year 2006.

The new data on state and local government pensions includes state-by-state information on the average benefit paid per beneficiary, state population per beneficiary, and employer versus employee contributions to the plans.

Part of the Tax Foundation's new research includes the 22 million jobs in the United States belonging to federal, state and local governments—or about 15 percent of the 144 million total wage and salary jobs in the country. The data in this section relates to the average compensation received by both government and private sector employees.

Finally, the Tax Foundation has made available information on many specific government functions, including average wages for employees working in the different government functions and the number of government employees per 10,000 state residents.

"We hope that this information will enable both policymakers and the general public to achieve greater understanding of the over 89,000 state and local government entities in the United States," Hodge said.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Census Survey: Northeast Continues to Rank Highest in Property Taxes on Homeowners

Mon, 21 Sep 2009 00:00:00 EDT

New York, New Jersey Counties See Highest Taxes Paid By Dollar Amount, Percentage of Home Value

The top 10 counties in median real estate taxes paid for 2008 are, from 1 to 10, City, State ($X,XXX); City, State ($X,XXX); City, State ($X,XXX); City, State ($X,XXX); City, State ($X,XXX); City, State ($X,XXX); City, State ($X,XXX); City, State ($X,XXX); City, State ($X,XXX); and City, State ($X,XXX). The national median is $X,XXX.

The top 10 counties in median real estate taxes as a percentage of median home value for 2008 are, from 1 to 10, City, State (X.X%); City, State (X.X%); City, State (X.X%); City, State (X.X%); City, State (X.X%); City, State (X.X%); City, State (X.X%); City, State (X.X%); City, State (X.X%); and City, State (X.X%). The national median is X.X%.

The top 10 states in median real estate taxes paid for 2008 are, from 1 to 10, State ($X,XXX); State ($X,XXX); State ($X,XXX); State ($X,XXX); State ($X,XXX); State ($X,XXX); State ($X,XXX); State ($X,XXX); State ($X,XXX); and State ($X,XXX). The top 10 states for median real estate taxes as a percentage of median home value are State (X.X%); State (X.X%); State (X.X%); State (X.X%); State (X.X%); State (X.X%); State (X.X%); State (X.X%); State (X.X%); and State (X.X%).

\The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Under Obama's Policies, Most Families Earning up to $109,000 Will Get More Back from Government Benefits Than They Pay in Taxes

Mon, 21 Sep 2009 00:00:00 EDT

Total Amount of Redistribution Will Near $1 Trillion

Washington, DC, September 25, 2009 - "Currently, most families earning up to roughly $86,000 receive more in federal spending than they pay in federal taxes," said Tax Foundation President Scott Hodge. "By 2012, if President Obama's proposals on taxes, health care and climate change become law, families earning up to $109,000 will, as a group, be receiving more in federal spending than they pay in federal tax."

In 2012, Obama's policies will increase the average amount of income redistributed from the top 1 percent of families to more than a half-million dollars per family—$505,000, up from an average of $378,000 today.

Even if none of Obama's policies becomes law, the extent of current income redistribution is remarkable: The top-earning 40 percent of families will transfer $826 billion to the bottom 60 percent in 2012. If Obama's policies become law, the federal government will redistribute nearly $1 trillion from the top-earning 30 percent of families to the bottom 70 percent (those earning up to $109,000).

In fiscal year 2010, the lowest-income families will receive $10.44 in federal spending for every dollar in taxes they pay. Middle-income families, who are the targeted beneficiaries of many Obama policies, will receive $1.15 in government spending benefits for every dollar they pay in taxes.

Incorporating new data from the Mid-Session Review of the President's Budget, as well as recently released aggregate economic data from BEA and new income tax statistics from the IRS, Hodge has authored two new analyses in the Tax Foundation Fiscal Fact series: "Accounting for What Families Pay in Taxes and What They Receive in Government Spending" and "Basic Facts on Redistribution and the Impact of Obama's Policies." The two publications are available online at http://www.taxfoundation.org/news/show/25195.html and http://www.taxfoundation.org/publications/show/25196.html, respectively.

The Tax Foundation's "fiscal incidence" project is a long-term research effort to include federal spending along with taxes in calculations of income redistribution. The standard operating procedure in Washington is to analyze only the distributional impact of taxes, ignoring spending because it is more difficult to quantify.

When only taxes are analyzed, Obama's policies lead to tax increases for a curious mix of rich and poor families. Families earning less than $23,700 are disproportionately affected by regressive cap-and-trade policies and higher tobacco taxes, and those earning more than $280,000 will see their tax payments go up because of higher income tax rates. On net, however, when spending is included, the lowest-income households gain more than $2,200 while the highest-income families lose more than $127,000.

"The taxes paid by the wealthiest families swamp any benefits they receive from government, even when counting national defense as largely benefitting high-income people," Hodge said. "As lawmakers consider important and far-reaching tax and spending policies such as health care and cap-and-trade, they should have a basic understanding of what might be called a 'fiscal accounting' of how government benefits families receive compare to what they pay in taxes. It's only within this framework that properly informed decisions can be made."

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Take-Home Pay Wont Increase Much from Inflation Adjustment in 2010

Wed, 16 Sep 2009 00:00:00 EDT

Based on Bureau of Labor Statistics Data, Report Predicts Tax Parameters for Tax Year 2010

Washington, DC, September 16, 2009 - Workers expecting an increase in take-home pay this January due to the annual automatic inflation adjustments can think again, according to a Tax Foundation analysis of Bureau of Labor Statistics (BLS) data released today. The agency announced that the Consumer Price Index year-over-year monthly average increased by only 0.19 percent - the smallest inflation adjustment since the IRS began adjusting the tax code for inflation. This comes just a year after the biggest increase in nearly two decades.

"The past two years mark two extremes - one high and one low - ever since inflation adjustments became part of the individual income tax in the mid-1980s," said Tax Foundation Senior Economist Gerald Prante, who authored Tax Foundation Fiscal Fact No. 188, "Inflation Adjustment for Tax Brackets Almost Zero for Next Year," with Staff Economist Mark Robyn. The Fiscal Fact is available online at http://www.taxfoundation.org/news/show/25127.html. "Last year, tax parameters like the standard deduction and tax brackets increased substantially in value, while this year, they are increasing very little or not at all."

After BLS releases its annual August estimate of the Consumer Price Index (CPI), the IRS calculates how much tax brackets will shift in the following year, along with several other important tax provisions that are affected by inflation. Employers will use these newly adjusted tax brackets to estimate withholding in 2010. The IRS will not publish the official inflation adjustments until later this fall, but rarely have the IRS's calculations differed from the Tax Foundation's estimates, and there are never any significant differences, according to Prante.

The Fiscal Fact also presents projections for each of the major tax parameters for tax year 2010, including every taxable income bracket, personal exemption, standard deduction, and phase-in and phase-out ranges for the limitations on personal exemptions and itemized deductions.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Tax Foundation Legal Brief Calls for Reversal of NY "Amazon Tax" Ruling

Tue, 15 Sep 2009 00:00:00 EDT

New York Supreme Court Ruling Sets "Unconstitutionally Expansive" Standards, Should Be Reversed, Amicus Brief Concludes

Washington, DC, September 15, 2009 - In a friend-of-the-court brief filed with the New York State Supreme Court's Appellate Division, the Tax Foundation argues that the state cannot legally compel Amazon.com, an out-of-state retailer, to collect sales taxes on purchases because the retailer does not have a physical presence in the state.

In arguing against the lower court's decision in Amazon.com, LLC v. New York State Dept. of Taxation and Finance, Tax Foundation Tax Counsel Joseph Henchman reviews the standards by which companies are proven to have a "substantial nexus" in a state - by meeting one of two tests establishing "physical presence." The brief finds that the State Supreme Court failed to address whether the activities of Amazon.com's in-state affiliates (independent persons within the state who post a link to Amazon.com on their websites and receive a share of revenues) are vital to maintaining the company's market in New York.

"In ruling that Amazon.com must collect sales taxes, the New York State Supreme Court has established an unconstitutionally expansive standard for determining whether a business has a 'substantial nexus' in a state - one that goes beyond any standing precedent," Henchman said. "Widespread adoption of such vague and expansive nexus standards undermines legal certainty, interstate commerce, and economic growth."

In April 2008, New York Gov. David Paterson signed into a law a budget requiring that out-of-state online retailers collect sales taxes on purchases if the company does at least $10,000 worth of business with in-state affiliates. Amazon.com filed suit shortly thereafter, but the New York State Supreme Court - the state's trial-level court (the Court of Appeals is the state's highest court) - ruled in favor of the state and upheld the so-called "Amazon tax."

In doing so, the Tax Foundation brief argues, the State Supreme Court confused elements from two separate physical presence tests established by legal precedent and determined that the in-state Amazon.com affiliates were independent contractors, but did not address whether their activities were significant for Amazon.com's New York market (which, given that they represent only 1.5 percent of the company's in-state sales, is doubtful).

"The economic and technological developments of the past few decades make preserving a bright-line physical presence nexus rule for state taxation all the more vital," Henchman said. "The State Supreme Court's Appellate Division should act swiftly to ensure that interstate commerce is not impeded."

Tax Foundation Fiscal Fact No. 187, " 'Amazon Tax' Unconstitutional and Unwise," provides a summary of the brief and may be found online at http://www.taxfoundation.org/news/show/25120.html, along with a copy of the full brief.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937. Since 2007, the Center for Legal Reform at the Tax Foundation has participated as amicus curiae before the U.S. Supreme Court and appellate courts in five states in cases involving tax/fee distinctions, taxpayer protections, multiple taxation and tax discrimination, and the power to impose taxes.

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To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Sales Tax Holidays Distort Consumer, Business Decisions, Provide Little Relief to Taxpayers

Wed, 26 Aug 2009 00:00:00 EDT

Temporary Political Stunts Distract from Much-Needed Permanent Tax Reform, According to Tax Foundation Study

Washington, DC, August 26, 2009 - As a number of states wrap up back-to-school sales tax holidays, a new Tax Foundation study shows that the temporary, targeted periods of sales tax exemption are nothing more than political gimmicks that do little to help consumers. Instead, the holidays distort consumer choices while favoring certain industries over others, increase tax code complexity, and distract from real, permanent tax relief.

According to Tax Foundation Special Report No. 171, "Sales Tax Holidays: Politically Expedient but Poor Tax Policy," 16 states are offering sales tax holidays in 2009—down from 17 in 2008—including 13 that exempt clothing, eight for school supplies, seven targeting computers, and three applied to Energy Star products. The Special Report is available online at http://www.taxfoundation.org/publications/show/25052.html.

"If a state must offer a 'holiday' from its tax system, it's a sign that the state's tax system is uncompetitive—something that must be addressed with permanent reform," said Staff Economist Mark Robyn, who authored the paper with Director of State Projects Joseph Henchman and Adjunct Scholar Micah Cohen. "In order to provide lasting relief to consumers, policymakers should cut the sales tax rate year-round, while broadening the sales tax base to include all goods and services would ensure that government would be able to raise necessary revenue in the least economically distortionary way."

Among the study's key findings:

Sales tax holidays do not promote economic growth or significantly increase consumer purchases; the evidence shows that they simply shift the timing of purchases. Some retailers raise prices during the holiday, effectively absorbing the benefit of the holiday and reducing consumer savings.
Sales tax holidays create complexities for tax code compliance, efficient labor allocation, and inventory management. Instability in tax law is costly to the economy not only because of complexity, but because it disrupts plans and expectations of consumers and businesses, especially as states cancel sales tax holidays due to the recession and related revenue loss.
Most sales tax holidays involve politicians picking products and industries to favor with exemptions, arbitrarily discriminating between products and across time, and distorting consumer decisions. For example, Virginia's hurricane-preparedness sales tax holiday applies to cell phone chargers but not laptop chargers, and duct tape but not masking or electrical tape. South Carolina's gun sales tax holiday applies to firearms but not associated safety products.
While sales taxes are somewhat regressive, sales tax holidays are a bad way of providing relief to the poor. Sales tax holidays amount to a 4 percent to 7 percent price reduction for all consumers, but only for a brief period of time.

"Taxes should raise revenue, not micromanage a complex economy by picking winners and losers in the market," the authors conclude. "Sales tax holidays neither promote economic growth nor increase purchases. They create complexities for all involved, while inserting the political process into consumer decisions. By distracting high-tax states from addressing real problems with their tax system, holidays undermine efforts to provide legitimate relief to consumers."

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Special Report No. 171, "Sales Tax Holidays: Politically Expedient but Poor Tax Policy," is available online at http://www.taxfoundation.org/publications/show/25052.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

California Court Calls a Tax a Tax, Agreeing with Tax Foundation Amicus Brief

Wed, 19 Aug 2009 00:00:00 EDT

Court Mandate to Refund Disguised Tax Should Send Signal to Cities with Similar "Fees"

Washington, DC, August 19, 2009 -- The Tax Foundation today lauded California's Fourth District Court of Appeal ruling that San Diego's "fee" associated with collecting a rental tax is really an unconstitutional tax on landlords. Joseph Henchman, Tax Counsel for the Tax Foundation, authored a friend-of-the-court brief in the case arguing that the "fee" indeed is a tax and should be repealed. Today he issued the following statement:

"All over the country, politicians are increasingly trying to label taxes as 'fees' in an effort to get around voter-approval requirements or otherwise discreetly raise revenue. This case, Weisblat v. City of San Diego, shows that we're making progress in clarifying those definitions. The purpose of a tax is to raise revenue, while the purpose of a fee is to cover the cost of providing a service.

In San Diego's case, money raised from the so-called 'fee' on rental property owners provided no services to the landlords, but simply went into the city's general fund to help fill a revenue shortfall. Mislabeling what are really taxes as 'fees' is problematic for a number of reasons, which the Tax Foundation outlined in its amicus brief. Other than being unconstitutional under a state law that requires voter approval for tax increases, blurring the line between taxes and fees also conflates the purposes for which the revenue may be used.

Clearly identifying taxes as taxes and fees as fees increases government transparency and helps taxpayers understand where their money is going. It's only under that kind of a system that voters and policymakers can make sound, informed choices."

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Tax Foundation Fiscal Fact No. 160, "Charging Taxpayers for Tax Collection is a Tax: Weisblat v. City of San Diego," is available online at http://www.taxfoundation.org/research/show/24309.html. The Tax Foundation's brief may be found here: http://www.taxfoundation.org/publications/show/24307.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Study Calculates Economic Cost of Higher Tax Rates, Health Care Surtax

Fri, 14 Aug 2009 00:00:00 EDT

Total Burden of Higher Top Income Tax Rates, Health Care Surtax is Nearly Twice the Additional Revenue Raised

Washington, DC, August 14, 2009 - The actual economic costs of the proposed health care surtax and the expiration of the 2001 and 2003 tax cuts will be twice the amount of revenue the government intends to collect. According to a new analysis from the Tax Foundation, the higher tax rates are estimated to raise $88 billion in 2011, but the economy will incur an additional burden of $76 billion—or "deadweight loss"—as a result, which raises the total cost of the tax increases to $164 billion, roughly double what lawmakers intend to raise.

Tax Foundation Special Report No. 170, "The Excess Burden of Taxes and the Economic Cost of High Tax Rates," attempts to put a price tag on the cost of pending rollbacks of the Bush tax cuts (which would raise the top tax rate to 39.6%) as well as the proposed health care surtax (ranging from 1% to 5.4%). This loss in economic efficiency is also known as the "excess burden" or "deadweight loss" of taxes—the income that would need to be given to people to compensate them for the resources that are lost due to the distorting effect of taxes. The Special Report is available online at http://www.taxfoundation.org/news/show/25003.html.

"The notion that the total burden is nearly twice the revenue collected should give lawmakers some pause when considering these higher tax rates," said Tax Foundation Senior Fellow Robert Carroll, Ph.D., who authored the paper.

"Lawmakers need to understand that the current income tax system already costs the economy between $110 billion and $150 billion above and beyond the $1 trillion the government actually collects in taxes," Carroll said. "This means the actual economic cost of our income tax system is at least $1.10 for every dollar the government collects. The proposed higher tax rates could boost those deadweight costs to more than $1.20 for every dollar of tax revenues collects."

"The burden is particularly high for the higher income tax rates being considered by the Congress," says Carroll. "With every dollar in additional revenue, these tax increases impose an extra burden of 86 cents." For example, in 2011 a couple earning $500,000 will pay $112,437 in income taxes. But the excess burden to them of that tax payment is $16,664, about 15% of their tax burden. The increase in the top two tax rates plus the health care surtax would boost their income tax payment an additional $7,719 to $120,156. However, that tax hike would also increase their excess burden by $8,748, larger than the tax increase itself.

"When totaled over all taxpayers, this means," says Carroll, "that the total economic cost of the higher tax rates will be close to twice the amount lawmakers hope to collect."

"Lawmakers should be wary of policies that are purported to make higher-income taxpayers 'pay their fair share' but that impose very substantial burdens on all taxpayers—nearly twice the revenue that is raised—and waste substantial economic resources," Carroll concluded.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Special Report No. 170 is available online at http://www.taxfoundation.org/news/show/25003.html. A related study, Tax Foundation Fiscal Fact No. 186, "Towards Understanding the Full Burden of High Tax Rates," is available online at http://www.taxfoundation.org/publications/show/25006.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

How Would House Health Care Plan Affect Employer, Individual Coverage?

Thu, 13 Aug 2009 00:00:00 EDT

Tax Foundation Outlines Health Insurance Scenarios Under Policies Proposed in House Bill

Washington, DC, August 13, 2009 -- Members of Congress are hosting town hall meetings across the country this month to garner support for health care reform and hear constituents' concerns, but what would current legislation really mean for individuals' health care coverage? A Tax Foundation report examines "America's Affordable Health Choices Act" and provides an outline of how the bill would affect various health insurance scenarios.

"Many industry phrases are being thrown around in the media, but a lot of Americans are wondering how these reforms would really affect their families' health coverage," Tax Foundation President Scott Hodge said. Tax Foundation Fiscal Fact No. 185, "Outline of Individual and Employer Coverage under House Health Care Reform Bill," is available online at http://www.taxfoundation.org/publications/show/24997.html.

The proposed legislation would establish a public option for health insurance that would be available in a national health insurance exchange in which private insurers also would be allowed, as well as new taxes on both businesses that do not provide health insurance to employees (also known as "pay or play") and on individuals not covered by employer plans who do not purchase health insurance on their own.

For example, under the House plan, companies with fewer than 50 employees and payrolls greater than $400,000 that do not offer health insurance to workers must pay a tax equaling 8% of total payroll. A same-sized company that does offer health insurance to employees has the option of purchasing health insurance from outside or within the exchange (including the public option) and may also be eligible for tax credits if the company is small enough and average wages are low enough.

An individual working at the first company (no employer-provided insurance) making between 133% and 400% of the federal poverty level (around $88,000 for a family of four in 2009) may purchase health insurance through the exchange (private or public) and have it partially subsidized by the government. If the individual makes more than 400% of the federal poverty level, he or she would be required to purchase health insurance through the exchange or pay a tax.

An individual working at the second company (has employer-provided insurance) must enroll in the employer's plan assuming premiums do not exceed 11% of income.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Fiscal Fact No. 185 is available online at http://www.taxfoundation.org/publications/show/24997.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

As Industrialized Countries Cut Corporate Taxes, U.S. Rate Still Second-Highest

Wed, 05 Aug 2009 00:00:00 EDT

Washington, DC - Canada, the Czech Republic, Korea, and Sweden all cut their corporate tax rates in 2009, distancing the United States even further from the pack with its combined federal and state rate of 39.1 percent—second only to Japan for the highest corporate tax rate among nations in the Organization for Economic Cooperation and Development (OECD). A Tax Foundation analysis of new OECD data finds that 2009 marks the 12th consecutive year in which the U.S. corporate tax rate is higher than the average rate among non-U.S. OECD nations—and roughly 50 percent higher than that of a mid-ranked country such as Sweden.

"America's high corporate tax rate should be a red flag to U.S. lawmakers worried about the country's flagging economic growth, slow wage growth, and our overall global competitiveness," write Tax Foundation President Scott Hodge and Summer Fellow André Dammert, who authored Tax Foundation Fiscal Fact No. 184, " U.S. Lags While Competitors Accelerate Corporate Income Tax Reform." The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/24973.html.

Korea enacted the largest rate cut this year of 3.3 percentage points, followed by Sweden and Luxemburg, which cut their rates by 1.7 points and 1 point, respectively. Great Britain - from which Google recently moved its European operation to lower its tax bill - and Japan are transitioning toward more "territorial" tax systems that tax firms only on the profits earned within the country's borders. These global trends toward lower corporate tax rates and "territorial" systems that don't tax foreign profits stand in stark opposition to the Obama administration's proposal to raise more than $220 billion in new corporate taxes by making the U.S. world-wide tax system tougher.

"U.S. lawmakers must take note of these global trends and take steps to make the U.S. corporate tax system competitive with its major trading partners," Hodge and Dammert conclude. "If they don't, we risk continuing to fall behind in the global race to attract capital, jobs, and economic growth."

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Fiscal Fact No. 184 is available online at http://www.taxfoundation.org/publications/show/24973.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Study: State Corporate Income Taxes Hurt Workers Wages

Mon, 03 Aug 2009 00:00:00 EDT

$1 Increase in State-Local Corporate Tax Rate Causes $2.50 Drop in Wages Five Years Later

Washington, DC, August 3, 2009 - High corporate income taxes are often justified by the rhetoric that businesses—and their high-income investors—should "pay their fair share." In Tax Foundation Special Report No. 169, "The Corporate Income Tax and Workers' Wages: New Evidence from the 50 States," Senior Fellow Robert Carroll, Ph.D., finds that states with high corporate income taxes have likely depressed their workers' wages over the long term, while states with low corporate taxes have boosted worker productivity and real wages.

"These findings are not only consistent with a growing body of research on international corporate income taxes and wages, but they get to the heart of a longstanding political argument on business taxation," Carroll said. "Raising corporate income taxes has been viewed as an effective way for governments to push the tax burden onto the people who can best afford it, but this assumes that capital income, which is earned disproportionately by those with higher incomes, is indeed bearing the burden of the tax. We now see, however, an increasing amount of evidence suggesting that this is not the case."

This new Tax Foundation study finds that for every $1 rise in state and local corporate tax collections, real wages fall by $2.50 five years later. The reverse is also true: Wages rise $2.50 for every $1 reduction in state and local corporate income taxes.

This finding—that the burden of corporate income taxes ultimately falls on labor—supports previous research indicating that corporate taxes are not borne by capital because capital, in today's increasingly global economy, is mobile, but labor is not.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Special Report No. 169 is available online at http://www.taxfoundation.org/research/show/24960.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Income Tax Payment of Top 1% of Filers Exceeds that of Bottom 95%

Thu, 30 Jul 2009 00:00:00 EDT

New IRS Data: Top Earners Made the Most Ever and Paid the Most Ever

Washington, DC - The top 1 percent of tax filers earned about 22.8 percent of the nation's income in 2007 (the latest IRS data available), and paid 40.4 percent of all federal income taxes - more than the bottom 95 percent of tax filers combined, according to a Tax Foundation analysis of just-released IRS data.

Both income and income tax shares for the top 1 percent of tax returns (AGI over $410,096) hit all-time highs in 2007. In Fiscal Fact No. 183, "Summary of Latest Federal Individual Income Tax Data," Tax Foundation Senior Economist Gerald Prante notes that the record-setting trend for income and income tax shares is likely to end with 2007, given the economic downturn in 2008.

"This pattern at the top of the income spectrum is the same during almost every recession and recovery," according to Prante. "Unlike middle-income wage-earners whose incomes and tax liabilities are fairly steady, high-income people have incomes and tax liabilities that fluctuate wildly with the economy. The sharp rise in federal government tax revenue from 2003 to 2007 is likely to be followed by a substantial dip in 2008, 2009 and perhaps 2010 as the economy struggles through the worst recession since the early 1980s."

Fiscal Fact No. 183, available online at http://www.taxfoundation.org/publications/show/250.html, also takes a look for the first time at the top 0.1 percent of tax returns (the top 10 percent of the top 1 percent), which amounts to only 141,000 tax returns, but accounts for nearly 12 percent of AGI earned and around 20 percent of the nation's federal individual income taxes.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Fiscal Fact No. 183 is available online at http://www.taxfoundation.org. Summary tables of federal individual income tax data from 1980-2007 is available here: http://www.taxfoundation.org/publications/show/23408.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Obama Budget, Health Care Surtax Will Shrink Federal Income Tax Base

Wed, 29 Jul 2009 00:00:00 EDT

Federal Government Would Lose 40 Cents of Every Dollar Subject to Higher Tax Rates in 2011

Washington, DC, July 29, 2009 - With the expiration of the Bush tax cuts and the implementation of a proposed health care surtax, in 2011 the top federal individual income tax rate will rise to more than 46% and over 50% for those living in many states. This sharp increase in tax rates can be expected to reduce the size of the tax base and may raise substantially less revenue than the casual observer might think—perhaps only 60 cents on the dollar.

In Tax Foundation Fiscal Fact No. 182, "The Economic Cost of High Tax Rates," Senior Fellow Robert Carroll explains that for every 1% decrease in the after-tax reward from earning income—what taxpayers get to keep after paying taxes—taxpayers reduce their reported income by about 0.4%. The Fiscal Fact is available online at http://www.taxfoundation.org/publications/show/24935.html.

"Obama's plan to raise the top tax rate from 35% to 39%, combined with the health care surtax, would mean top-earning households are keeping 17% less of their income after paying taxes," Carroll said. "Those earners can be expected to reduce their reported incomes by nearly 7%, resulting in a smaller tax base and less revenue for the government."

The high tax rates will also disproportionately harm small businesses and discourage entrepreneurialism. Carroll notes that roughly one-third of all business taxes are paid by owners of so-called "flow-through" businesses—sole proprietorships, partnerships and S-corporations—when they file individual income tax returns. About one-fourth of taxpayers hit by the higher tax rates derive at least 50 percent of their income from a flow-through business. Also, a substantial share of the new revenue—40 percent for the increase in the top two tax rates and 29 percent for the high-income surtax—can be attributed directly to the income reported for flow-through businesses by their owners.

"High tax rates have serious economic consequences," Carroll concluded. "They cause taxpayers to base decisions more on tax considerations and less on economic merit. They also shrink the size of the tax base, raise less revenue than some might think, and overly burden the entrepreneurial sector."

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

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Fiscal Fact No. 182 is available online at http://www.taxfoundation.org/publications/show/24935.html. To schedule an interview, please contact Natasha Altamirano, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or naltamirano@taxfoundation.org.

Tax Foundation - Press Room

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Take-Home Pay Wont Increase Much from Inflation Adjustment in 2010

Study: State Corporate Income Taxes Hurt Workers Wages