Tax Foundation - Press Room

First Hard Numbers on Obama Tax Plan Show Dramatic Tax Redistribution

Thu, 26 Jun 2008 00:00:00 EDT

Senator Obama's tax plan is a dramatic redistribution of the nation's tax burden, according to a new Tax Foundation analysis.

In Tax Foundation Fiscal Fact, No. 132, Tax Foundation president Scott Hodge uses revenue estimates from the Tax Policy Center to show that Obama's plan would greatly accelerate the decades-long trend toward a federal government that depends for tax revenue almost exclusively on a few high-income people.

This contrasts starkly with the McCain plan, according to Hodge, which would give every taxpayer a cut and leave the current tax burden distribution approximately where it is.

"Under the Obama plan for 2009," explains Hodge, "more than $131 billion would be redistributed from the top 1 percent of taxpayers to all other taxpayers."

As a result, the top 1 percent of households would pay more federal taxes of all kinds than the bottom 80 percent of households. That lopsided distribution under Obama does include payroll taxes and other federal taxes, but it excludes the new payroll tax hike that Obama plans to levy on people making more than $250,000 because details about that plan are currently unclear.

"In other words," says Hodge, "it is at this point a cautious estimate to say that in 2009, under Obama's plan, 1.13 million Americans would pay more in all federal taxes than 128 million of their fellow citizens combined."

To put the Obama plan in historical context, Hodge cites various statistics that show the U.S. tax system evolving into one where a majority of Americans pay little or nothing:

Between 1999 and 2006, the number of tax filers who had no income tax liability after taking advantage of their credits and deductions grew from 30 million to nearly 44 million.
Looking at all federal taxes combined, the CBO says that between 1990 and 2005, the tax share of the bottom 80 percent of households dropped from 42 percent of the total to 31 percent. Meanwhile, the tax share of the top 1 percent of households rose from 16 percent to 28 percent.
In 2004, the nation's tax and spending policies redistributed more than $1 trillion in income from the top 40 percent of American households to the bottom 60 percent of households.

Hodge points out that in contrast to much campaign rhetoric about helping low- and middle-income people, Obama's plan redistributes more dollars from the top 1 percent to the rest of the top 20 percent (those earning roughly $93,000 to $192,000 per year) than to any of the lower-earning quintiles of taxpayers.

Hodge acknowledges that some Americans may cheer this dramatic dependence on the highest earners, but he says the shift should be part of a larger national discussion asking questions such as:

What is the long-term effect on the economy if so few households shoulder such a large share of the tax burden?
When a majority of Americans are paying so little for government, will that majority then demand even more services than they would have otherwise?
Can a tax system so focused on redistribution be compatible with economic growth?

The new study, "Hard Numbers on Obama's Redistribution Plan," is available online at www.taxfoundation.org/publications/show/23319.html.

Presidential Election Campaign Fund Untapped by Obama Claims Little Support from Taxpayers

Fri, 20 Jun 2008 00:00:00 EDT

As Senator Obama abandons public financing, a new Tax Foundation analysis shows that most American taxpayers were never enthusiastic enough to contribute to the program on their tax returns.

In Tax Foundation Fiscal Fact, No. 130, analyst Mark Robyn explains how the Presidential Election Campaign Fund works and explores the low taxpayer participation rate.

On the 1040 form, all tax filers can check a box marked Presidential Election Campaign if they want $3 of their tax payments to go into this fund ($6 for couples). Taxpayers are assured that they are not paying extra if they check the box.

"Only about 12 percent of taxpayers nationwide have been checking the box in recent years," says Robyn.

Robyn calls the assurance that the $3 is free to the taxpayer "dubious" and suggests four reasons for the lackluster participation:

• Taxpayers may be angry about the tax code in general.

• Taxpayers may oppose public funding of political campaigns in principle.

• Taxpayers may have little or no idea what the Presidential Election Campaign Fund really is.

• Taxpayers may disbelieve the assurance that checking the box will not cost them extra.

Robyn explains that the Presidential Election Campaign Fund is designed to level the playing field for candidates by providing them with public funding for their presidential primary campaigns and their general election campaigns, provided the candidates meet various qualifications.

The best-known requirement for receiving the public funds is the reason Obama rejected them: for 2008, the overall spending limit is just over $42 million on primaries and $84 million for the general election.

"When the Presidential Election Campaign Fund was first established in the 1970s, the participation rate hovered around 27 percent of filers," commented Robyn, "but since then, fewer people have checked the box."

However, there are pockets of stronger support among high-income people.

"Support is about twice as strong at the top of the income scale," said Robyn, "but even among people who declare more than a million dollars in income, only about one quarter of them check the box."

The new study, "The Presidential Election Campaign Fund: A Voluntary Tax That Stirs Little Enthusiasm," is available online at http://www.taxfoundation.org/publications/show/23305.html.

Tax Foundation Study: Obama Plan to Lift Social Security Wage Tax Ceiling Would Hit High-Income States

Tue, 03 Jun 2008 00:00:00 EDT

Washington, D.C., June 3, 2008 - New Jersey, Maryland and Connecticut lead the list of states that would bear the brunt of the Social Security tax hike that Sen. Obama has suggested.

In Tax Foundation Fiscal Fact, No. 128, economist Gerald Prante ranks the 50 states from least to hardest hit, assuming Sen. Obama's proposal to lift the wage tax ceiling becomes law.

"More than 10 percent of taxpayers in New Jersey would pay higher payroll taxes if the wage tax ceiling were abolished," says Prante. "It would have a much smaller impact in Montana, North Dakota and South Dakota where fewer than three percent of individuals earn more than the current wage tax ceiling."

The wage tax ceiling was $94,700 for a single person in 2006, the most recent year for which tax data is available. In 2008, the ceiling is $102,000, so the maximum Social Security tax for a single person is 12.4 percent of the first $102,000 in wages, or $12,648.

In response to Obama's editorial in the Quad City Times last September suggesting the payroll tax ceiling be repealed, critics asked how that fits with his promise not to raise taxes on anyone who makes less than $200,000 or $250,000 (Obama has cited both figures). Obama's response, from his Web site, is, "We may want to include a ‘donut hole' to ensure that lifting the payroll tax cap does not ensnare any middle class Americans."

The "donut hole" idea is that wages up to the ceiling would be taxed as usual, followed by a non-taxable amount up to $200,000 or $250,000, and then all wages above that would be taxed.

"It's dubious whether anyone who earns between $100,000 and $250,000 should be called ‘middle class'," comments Prante, "because only about two percent of Americans earn more."

Of more concern to Prante is the prospect of taxing high-wage income at rates well above 50 percent. Obama has called for the top federal income tax rate to revert from 35 percent to 39.6 percent. Add to that an uncapped payroll tax rate and the typical state's top income tax rate, and the result is a top marginal tax rate of between 55 and 61 percent.

"When government takes 60 cents of a high-income person's next dollar of wage income, the taxpayer has less incentive to work but more incentive to game the tax system with complex tax planning," says Prante.

The new study, "Obama's Plan to Abolish the Social Security Wage Ceiling: A State-by-State Breakdown," is available online at www.taxfoundation.org/publications/show/23243.html.

Tax Foundation Research Helps Clarify the Gas Tax Debate

Thu, 08 May 2008 00:00:00 EDT

Fuel taxes have recently become a hot topic in the presidential campaign and in the media. Everyone has an angle on this issue. Environmentalists worry about the effect of gas consumption on the environment and want to use the tax to change consumers' behavior; motorists express outrage at the price they have to pay to fill up their tanks and demand tax relief; presidential candidates focus on the impact of the tax on the "middle class," and some politicians tell constituents and voters that government intervention is the only solution; some policymakers and media claim that big oil companies aren't paying their fair share and demand windfall profits taxes; and, finally, economists ask, What is the purpose of this tax, anyway?

The purpose of the gas tax is simple: to raise revenue for building and maintaining roads and related infrastructure. This approach conforms to what economists call the "benefit principle" of taxation, which stipulates that consumers of government services should pay in proportion to the benefit they obtain from those services. It follows that the revenue raised from a tax that adheres to the benefit principle should be used solely to provide the good or service on which the tax is levied. Therefore, if gas taxes are paid by the individuals who benefit most from roads (drivers) and if the revenue is used solely for road building and maintenance, then the tax is a good one.

However, there is also the question of whether gas taxes should be used to decrease fuel consumption in order to protect the environment and reduce pollution. Pigouvian taxes, named after Arthur C. Pigou, a renowned English economist from the early 20th century, are taxes that attempt to make up for undesirable side effects of certain industries—what economists call "negative externalities." Pigouvian taxes are controversial and often difficult to calculate; they complicate the gas tax debate considerably.

A number of Tax Foundation publications and blog posts can help clarify the issue. Tax Foundation President Scott Hodge's Tax Gouging at the Pump and Record Taxes Paid before Record Oil Profits explain that oil companies actually pay more in taxes than they earn in profits, contrary to some people's notion that "greedy" oil companies are raking in huge profits without paying their fair share of taxes. The Tax Foundation Background Paper Paying at the Pump: Gasoline Taxes in America provides an in-depth look at the history and use of gas taxes (send us an e-mail if you'd like a free hard copy). The Fiscal Fact Questions to Ask before Raising the Federal Gas Tax presents a concise discussion of the role of fuel taxes. The Distributional Impact of Windfall Profits Taxes and a Gas Tax Holiday shows how much money taxpayers in each income group stand to gain or lose under the gas tax proposals put forth by the presidential candidates.

In addition, the Tax Data section of our website contains a section on gas tax charts, which includes the following:

Click here for more Tax Foundation studies and blog posts on gas taxes.

Tax Foundation Urges a Stop to South Dakota's Discriminatory Insurance Taxes

Wed, 16 Apr 2008 00:00:00 EDT

Brief Supports Challenge to Law Taxing Out-of-State Companies at Twice the Rate of In-State Companies

The Tax Foundation, in a friend-of-the-court brief filed on April 15 with the South Dakota Supreme Court, urged that state to stop its discriminatory insurance tax system that taxes out-of-state companies at twice the rate of in-state companies. The case, Metropolitan Life Ins. Co., et al. v. Kinsman, et al., is currently before the court on a petition for rehearing.

"Since explicit discrimination in rates was struck down by the U.S. Supreme Court in 1985, South Dakota is one of just eight states that seek to protect their domestic insurance companies by imposing heavier taxes on out-of-state companies doing business in the state," said Tax Counsel Joseph Henchman, author of the brief. "While on paper all companies pay the same 2.5% rate, in-state companies automatically receive rate reductions, lowering their tax bill to 0.75% to 1.25%. The result is effective discrimination against out-of-state companies which violates the Equal Protection Clause," Henchman added.

While the trial judge invalidated the statute in this case, late last month the state Supreme Court reversed. The Tax Foundation brief argues that the court's decision is problematic because (1) it does not consider the Findings of Fact by the trial judge, (2) the standard adopted by the Court will be problematic, and (3) the statute does not survive rational basis review.

"The State Supreme Court said that the tax scheme is non-discriminatory because an out-of-state company can avoid the punitive tax by opening an office in the state," Henchman said. "But this misses the point because what matters is discrimination in this case, not some hypothetical different case. The court's new rule would uphold any kind of discriminatory government behavior if the victim could conceivably avoid it."

The brief also reviews the issue of retaliatory taxes, which the Court's opinion ignored. South Dakota's domestic insurance industry suffers because of these taxes, which are imposed by other states on companies from states that practice tax discrimination. For example, a South Dakota company doing business in Minnesota must pay Minnesota's regular 2.0% insurance tax, plus a 0.5% retaliatory tax (representing the difference between Minnesota's rate on out-of-state companies and South Dakota's rate on out-of-state companies). Few South Dakota companies do business in other states as a result.

South Dakota is not alone in having in-state insurance companies automatically qualify for lower rates, but subjecting out-of-state companies to additional hurdles to do so.

"Colorado, Hawaii, and Nevada have insurance tax schemes similar to South Dakota's, and their constitutionality could be impacted by the outcome of this case," Henchman said. "Louisiana and Mississippi also favor in-state insurance companies, and Indiana gives them lower rates as a matter of law."

The Tax Foundation's brief concludes by arguing that South Dakota's tax does not survive "rational basis review," which invalidates laws unless they "bear a rational relation to a legitimate state purpose." For example, the tax does not help the state raise revenue or regulate insurance companies since those functions are not helped by a discriminatory tax law. Drawing on the Tax Foundation brief in the Kentucky v. Davis case and the principles of sound tax policy, the brief argued that states cannot promote in-state economic development by punishing out-of-state companies or economic activity with heavier taxes.

"South Dakota should aim to tax all similar activity at the same general rate in order to maintain a neutral tax system," Henchman said.

A decision on the petition for rehearing is expected in April or May.

Click here to read the brief. Click here for more on the Tax Foundation's Center for Legal Reform.

New Testimony: Tax Foundation Tells Congress that Fundamental Tax Reform Is Still Tax Policy's Most Important Long-Term Goal

Tue, 15 Apr 2008 00:00:00 EDT

Fundamental reform of the U.S. tax system poses significant political challenges, but it offers the opportunity to rationalize many aspects of the tax system, according to Tax Foundation testimony before the Senate Finance Committee on April 15.

Vice President for Economic Policy Robert J. Carroll told the tax-writers that fundamental tax reform has the potential to reduce the compliance burdens imposed on both households and businesses, and at the same time create an environment for greater economic growth in the long-term in a manner that is appropriately fair.

A fundamental issue highlighted by Carroll was the choice between income-based and consumption-based taxes. Consumption taxes generally reduce the tax on saving and investment, and Carroll stressed the importance of this way to boost economic performance and living standards in the longer term, in a way that retained the current progressivity of the tax system.

Among the federal government's most important challenges, Carroll said that reforming the corporate income tax is becoming more urgent as our major trading partners around the world take the initiative. This was the theme of a recent Tax Foundation Fiscal Fact by Carroll.

"By standing still, the United States can expect to see reduced inflows of foreign capital and investment because the United States will be a less attractive place in which to invest, innovate and grow," commented Carroll. "In the near-term, this would translate into slower economic growth, a slower advance in labor productivity, and less employment."

Carroll also warns about the effect a significant tax disparity would have on innovation in the U.S.

"A key determinant of economic growth, innovation tends to take place where the investment climate is best," said Carroll. "Higher investment spurs innovation by raising the demand for these new technologies. This interplay between innovation and capital accumulation makes failure to reform the U.S. business tax system more damaging to the economy. As the U.S. corporate tax becomes ever more burdensome, the United States may fall behind in innovation and productive capacity."

Carroll's testimony is available at http://www.taxfoundation.org/publications/show/23092.html.

The Tax Foundation Fiscal Fact, No. 123, is titled "The Economic Consequences of Being Left Behind: A U.S. Business Tax System that is Out of Line Internationally," and is available at http://www.taxfoundation.org/publications/show/23092.html.

States Should Avoid Sales Taxes on Nonprofit Hospital Purchases

Fri, 11 Apr 2008 00:00:00 EDT

A new Tax Foundation Fiscal Fact, "States Should Avoid Sales Taxes on Nonprofit Hospital Purchases," provides a quick look at how each state taxes purchases made by nonprofit hospitals. While income tax exemptions for nonprofit hospitals may not be justified under the principles of sound tax policy, sales tax exemptions for the purchase of inputs are. Only seven states exempt inputs purchased by all hospitals, and six states do not exempt inputs purchased by nonprofit hospitals.

States seeking a neutral, transparent sales tax system should exempt all business-to-business transactions and impose sales tax only on final retail sales of goods and services. Because many states continue to impose sales tax on business-to-business inputs, examining the tax treatment of a variety of such transactions can provide insight into the neutrality and transparency of a state's overall tax system. For many states, exempting inputs from the sales tax should be a part of any tax reform effort.

Click here to read the Fiscal Fact. Click here for more on sales taxes.

Tax Freedom Day to Arrive April 23 in 2008

Thu, 10 Apr 2008 00:00:00 EDT

Contact: Bill Ahern (202) 464-5101

America Will Work Three Days Less to Pay Taxes in 2008 than in 2007; Stimulus Rebates Push Date of Celebration Up

Washington, D.C., March 24, 2008 - Tax Freedom Day® will fall on April 23 this year, according to the Tax Foundation's annual calculation using the latest government data on income and taxes.

That's three days earlier than in 2007. Stimulus rebates and a projection of slow growth in 2008 are the principal reasons for the earlier celebration.

The study is Tax Foundation Special Report No. 160, "America Celebrates Tax Freedom Day^®," by Tax Foundation senior economist Gerald Prante and Tax Foundation president Scott Hodge.

In addition to announcing the nation's Tax Freedom Day®, the new study compares tax payments to other major consumer expenditures, traces the course of America's tax burden since 1900, examines the composition of today's tax burden by type of tax, and finally calculates a Tax Freedom Day^® for each state.

Taxes vs. Other Expenses
"Government continues to dominate the American taxpayer's budget," said Tax Foundation president Scott Hodge. "Americans will still spend more on taxes in 2008 than they will spend on food, clothing and housing combined."

In 2008, Americans will work 74 days to afford their federal taxes and 39 more days to pay state and local taxes. Meanwhile, buying food requires 35 days of work, clothing 13 days, and housing 60 days. Other major categories are health and medical care (50 days), transportation (29 days), and recreation (21 days).

Bush Era Has Seen Tax Freedom Day^® Fluctuate Substantially
"Tax freedom has been a see-saw affair in recent years," said Tax Foundation senior economist Gerald Prante. "In 2000, Tax Freedom Day^® was celebrated May 3, the latest date ever. Then a string of tax cuts between 2001 and 2003 pushed Tax Freedom Day^® up by more than two weeks, so that it fell on April 16 in 2003 and April 17 in 2004. For the next three years, incomes and tax collections soared, pushing Tax Freedom Day^® back to April 26 in 2007. Now the stimulus rebates and a projected slowing of income growth have made Tax Freedom Day^® come three days earlier, on April 23."

Which Taxes Are Biggest?
Five major categories of tax dominate the tax burden. Individual income taxes, both federal and state, require 42 days' work. Payroll taxes take another 28 days' work. Sales and excise taxes, mostly state and local, take 16 days to pay off. Corporate income taxes take 13 days, and property taxes take 12.

Tax Freedom Day® by State
Alaskans kick off the celebration of Tax Freedom Day^® on March 29, more than a week before any other state's taxpayers. Mississippi (April 7), Montana and West Virginia (April 8), and Alabama (April 9) round out the first five. The next five are Kentucky (April 10), Tennessee and Oklahoma (April 11), and New Mexico and South Dakota (April 12).

Tax Freedom Day® is early in low-income states because the federal income tax hits most of their federal income taxes at the lower rates, 10% and 15%. Alaska stands out as an exception: income and federal tax payments are above average there, but state-local taxes are extraordinarily low.

Three states will have to wait until May to celebrate their state-specific Tax Freedom Days: Connecticut, New Jersey and New York. Although they have high state-local taxes too, the main culprit is the progressive federal income tax. States with large metropolitan areas offer higher-paying jobs, and as a result, many of the citizens earn enough to pay income tax at the highest rates -- currently 25%, 28%, 33% and 35%. If those rates rise, as they are scheduled to do in 2011, these states will bear the brunt.

Other states where citizens wait unusually long for Tax Freedom Day^® are California (April 30), Washington (April 29), Massachusetts (April 28), Maryland (April 28), Minnesota (April 27), and Florida and Hawaii on April 26.

How Tax Freedom Day® Is Calculated
Tax Freedom Day® answers the basic question, "What price is the nation paying for government?" An official government figure for total tax collections is divided by the nation's total income. The answer this year is that taxes will amount to 30.8 percent of our income, and the stretch of 113 days from January 1 to April 23 is 30.8 percent of the year. Income and tax data are then parsed out to the states, yielding 50 state-specific Tax Freedom Days.

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

Maryland Puts Final Touch on Historic Tax Hike

Wed, 09 Apr 2008 00:00:00 EDT

Today Maryland Governor O'Malley signed into law the final piece of the state's major tax overhaul, an eighth tax rate and bracket on personal income.

"We see no record of any state having raised all three of its major tax rates in one fell swoop, but Maryland has done just that," said Bill Ahern, referring to the hikes in the sales tax, the corporate income tax, and the personal income tax that received its final change today. The study is Tax Foundation Fiscal Fact, No. 124, "Maryland Flouts Regional Tax Competition with Historic Tax Hike."

The study points out that middle-income people in Maryland were and still are paying higher income taxes than in any border state, and that in only five U.S. states—California, Hawaii, Iowa, Maine and Oregon—could a couple with $75,000 in taxable income be in a higher tax bracket than an average Maryland couple. The Maryland rate for middle-income workers is about 7.5 percent (4.75% state plus 2.73% local).

From a regional vantage point, the study asserted that Maryland is flouting tax competition by enacting much higher personal income tax rates than are found in any border state.

"The State of Maryland will probably end up ‘paying' incoming or expanding businesses with generous tax breaks to make up for the high rates," predicted Ahern. "That's not uncommon, nor is the angry reaction of resident businesses who resent seeing the state's economic development office roll out the red, tax-exempt carpet for newcomers."

Other points from the study:

Maryland's personal income tax system has an unusually large marriage penalty.
For people in the $150,000-to-$500,000 range, the rising state-local tax deduction that they will be claiming on federal form 1040 may push them into the federal alternative minimum tax.

The study is available at http://www.taxfoundation.org/publications/show/23101.html.

New Study of Mississippi Tax Policy Urges Simplification

Thu, 03 Apr 2008 00:00:00 EDT

Mississippi's tax system is competitive, and the state's economy is prospering, but several reforms would make it even more conducive to economic growth, according to a new Tax Foundation Special Report, No. 161, "An Opportunity to Improve Mississippi's Tax Climate," by tax counsel Joseph Henchman and state relations manager Tonya Barr.

The study is based on testimony Henchman gave March 24 before the Mississippi Tax Study Commission, which was established by Governor Haley Barbour to prepare a comprehensive study of the state's tax system and recommend improvements by this coming summer.

"This fresh and all-inclusive look at Mississippi's tax system by an independent panel represents a great opportunity for the Magnolia State to reform its tax system in accordance with the principles of sound tax policy," Henchman testified. "By applying these principles, and reviewing the state's current performance as described by the Tax Foundation's State Business Tax Climate Index, we can identify several areas ripe for improvement."

In his testimony, Henchman highlighted these recommendations:

(1) Repeal at least one of three business taxes: the corporate franchise tax, the inventory tax, or the intangibles tax. This would reduce compliance and tax burdens while giving the state a comparative advantage over its neighbors.
(2) Resist calls to raise corporate tax rates or add new brackets, which would be at odds with the global trend of attracting business by lowering corporate tax rates, and flatten brackets because multiple rates on corporate income achieve no logical or progressive goal;
(3) Adjust brackets annually for inflation and conform to the federal tax base, to reduce compliance costs.
(4) Broaden the sales tax base and lower its rate, covering all final retail transactions while exempting business-to-business inputs to avoid taxes being levied on top of taxes.
(5) Eliminate or reduce special incentives (Mississippi offers at least 16 corporate tax incentive credits, and an explanation of them runs 98 pages long).

Testifying with Henchman were State Revenue Commissioner Joe Blount and Governing magazine/Pew Center on the States writer Richard Greene. Blount gave a factual narrative of how Mississippi's tax system developed. Greene advocated a principled approach to state taxation that keeps revenue stable and treats all sectors evenly, with a special caution in treatment of a possibly overtaxed telecommunications sector.

Senate's New Housing Tax Goodies Are Bad Tax Policy

Thu, 03 Apr 2008 00:00:00 EDT

Tax Credits by Sens. Isakson and Stabenow Incorporated into Larger Subsidy Bill

Faced with a choice between two bad new housing credits proposed by Sens. Johnny Isakson (R-GA) and Debbie Stabenow (D-MI), the Senate merged the two and added several more unwise housing tax incentives.

"The bill of housing incentives going to the floor of the Senate today is a panicky effort to artificially keep the housing bubble from popping," commented Gerald Prante, senior economist at the Tax Foundation. "Would it have been wise in 2001 for the government to have given tech stock investors a huge tax credit for having bought overvalued stock during that bubble?"

Prante is author of the recent study analyzing the Isakson and Stabenow credits, Tax Foundation Fiscal Fact, No. 122, "More Bad Ideas for Housing Tax Credits" available at www.taxfoundation.org/publications/show/23073.html.

Sen. Isakson had proposed a $5,000 tax credit that could be claimed for three years by buyers of homes that are vacant, occupied but in default, or foreclosed on. Sen. Stabenow had proposed a refundable, one-year credit of $6,000 ($3,000 for singles) for first-time homebuyers. The bill sent to the floor includes a $7,000 one-year credit for buyers of homes in foreclosure. On top of that provision, the Senate has added a "standard property tax deduction" of $1,000 for couples or $500 for singles.

"The regular standard deduction currently claimed by non-itemizers is already designed to include a property tax deduction," pointed out Prante. "If Congress wants to raise the standard deduction, they should just do that for everyone. They're acting as if renters are living on Easy Street."

On the corporate side, the Senate is determined to help "struggling home builders" by letting them retroactively deduct their current losses against the stellar profits they made during the housing bubble. The federal tax code already funnels more than $100 billion dollars annually into the housing sector, nearly 10 percent of total federal income tax collections.

"It would go too far to blame the current housing crisis on existing tax subsidies, or to predict that enacting more will cause another one, but using the tax code to subsidize housing hasn't worked to the nation's benefit, and it never can," said Prante.

Deficit concerns are getting short shrift in the debate.

"Someone has to pay for these massive giveaways," said Prante.

An Economic Analysis of Georgias Tax Cut Proposals

Tue, 25 Mar 2008 00:00:00 EDT

The Georgia legislature is currently facing the question of which taxes, if any, should be cut. Arguments have been put forth in favor of cutting income taxes, the personal property tax on cars, and even cutting income taxes for senior citizens only. Each side argues that its tax cut would be best for Georgia's economy going forward. Also on the table is a plan to enact a ceiling on spending growth in the Peach State. A new Tax Foundation Fiscal Fact, "An Economic Analysis of Georgia's Tax Cut Proposals," analyzes the two proposals favored by the House and Senate.

Click here for the Fiscal Fact. Click here for more on Georgia's tax system.

New Podcast on Corporate Capital Gains Taxes

Tue, 25 Mar 2008 00:00:00 EDT

A new Tax Foundation Tax Policy Podcast delves into the problem of the Untied States' high corporate capital gains tax rate.

Jim Tisch, President and CEO of Loews Corporation, and Ed McClellan, Tax Counsel at PricewaterhouseCoopers, talk to Tax Foundation President Scott Hodge about the difference between the individual capital gains rate and the corporate capital gains rate, the problem of "locked-in" assets and their detrimental impact on business decisions and job creation, the Untied States' decreasing global competitiveness in the face of European nations' cutting or eliminating the corporate capital gains tax, and the proposal to cut the 35 percent rate to 15 percent.

Click here to listen (18 minutes, 2 seconds).

Tax Foundation Criticizes North Carolina Lottery Ruling

Tue, 18 Mar 2008 00:00:00 EDT

Majority Opinion Might Create Loophole Around Taxpayer Protections

WASHINGTON, Mar. 18, 2008 - This morning, the North Carolina Court of Appeals upheld the constitutionality of the North Carolina Education Lottery by a 2 to 1 vote in Heatherly v. State. The court majority held that the lottery is not a tax, and thus did not violate taxpayer protections requiring new taxes to meet certain procedural thresholds.

"The majority opinion misses the mark in an important way," said Joseph Henchman, Tax Counsel at the Washington, D.C.-based Tax Foundation, which submitted an amicus brief supporting the constitutional challenge. "While it is true that lottery ticket purchasers receive a benefit in the form of prizes and operation costs, that's only 65 percent of what they pay. The other 35 percent goes straight to the government general fund, and that's a tax."

The majority opinion, written by Judge James Wynn, Jr. (D), held that the purchase of lottery tickets is more akin to paying a toll to enjoy a government-provided benefit rather than paying a tax. Further, purchasers of a winning ticket enjoy an exclusive right to the benefits that accrue, a benefit not shared generally by the citizens of North Carolina (like tax revenue would be).

"Part of a ticket can be described as a fee and analogous to tolls," Henchman said. "But that's not the case with the remaining 35 percent, which is a tax."

Henchman particularly criticized the majority's conclusion that the lottery cannot be a tax because the purchase of tickets is voluntary.

"Many people equate lotteries with 'voluntariness,' but that avoids the key point: just because a purchase is voluntary, that doesn't make the payment of tax voluntary," Henchman said. "People voluntarily purchase liquor from state-owned liquor stores in North Carolina, but part of that payment is still a tax (the state liquor tax)."

"The 35 percent of lottery revenues that go to the general fund are above and beyond the fees necessary to run the program, and because the proceeds are used to benefit all North Carolinians, it is a tax," Henchman added.

Judge Ann Marie Calabria (R), in a twelve-page dissent, echoed arguments made in the Tax Foundation's brief.

"[T]he thirty-five percent assessment is a tax," Judge Calabria wrote. "[T]he purpose of the assessment is to raise revenue for education programs which is a general public purpose. Unlike a fee, the assessment does not merely create incidental revenue used for education."

Judge Calabria also criticized the majority's fixation on voluntariness.

"The majority focuses on whether a person voluntarily chooses to purchase a lottery ticket. Yet, it does not matter whether a person voluntarily chooses to purchase a lottery ticket or voluntarily chooses to pay a toll. Virtually every purchase is voluntary and the majority's analysis would convert nearly every assessment, including a general sales tax, into a 'fee.'"

Henchman echoed the warning.

"The majority opinion, by seeming to convert nearly every assessment into a fee, might allow any new tax to get around important taxpayer protections."

The North Carolina Institute for Constitutional Law, which brought the challenge, will be considering whether to appeal the case to the North Carolina Supreme Court.

Read the Tax Foundation's report on the Heatherly case here.

The nonpartisan, nonprofit Tax Foundation has monitored tax policy at the federal, state and local levels since 1937. Best known for its annual calculation of Tax Freedom Day^®, the Tax Foundation is a nonprofit, nonpartisan 501(c)(3) organization.

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New Study: U.S. States Suffer as They Become Biggest Corporate Taxers in the World

Tue, 18 Mar 2008 00:00:00 EDT

Combined with federal tax, corporate income tax in most states is world's highest

WASHINGTON, Mar 18, 2008 - A new study from the Tax Foundation, a nonpartisan tax research group in Washington, shows that most American states tax job providers at a higher rate than any other country in the developed world.

"This is startling news for America's businesses and workers," said Tax Foundation president Scott Hodge, the study's author. "Tax competition for jobs and investment is fierce, and the U.S. continues to fall further and further behind. Our states should be the world's leaders in many things, but high taxation should not be one of them. The high federal corporate tax rate is literally crushing states' competitive abilities. That means fewer jobs for American workers."

Counting the federal rate alone, the U.S. has the world's highest corporate tax rate, but including average sub-national rates (federal plus state in the U.S.), Japan edges out the U.S. for the highest-tax location (see table).

This new study breaks the tax down state-by-state, adding each state's corporate tax rate to the federal corporate tax rate. The results show that 24 states impose, when combined with the federal rate, a higher business tax rate than in any other nation. In fact:

24 states have a combined corporate tax rate higher than top-ranked Japan.
32 states have a combined corporate tax rate higher than third-ranked Germany.
46 states have a combined corporate tax rate higher than fourth-ranked Canada.
All 50 states have a combined corporate tax rate higher than fifth-ranked France.

"If federal lawmakers are serious about making the U.S. corporate tax system more competitive globally, they will have to partner with state officials to lower the nation's overall corporate tax burden," Hodge added. "Likewise, state officials should have a vested interest in cutting the federal corporate tax rate because there is only so much they can do to improve their own competitiveness. After all, even corporations in the three states that do not impose a major state-level corporate tax—Nevada, South Dakota, and Wyoming—still shoulder a higher corporate tax rate than France, and 25 other major countries, because of the 35 percent federal corporate rate."

The table below lists each state's combined corporate tax rate, and then compares them (bolded) with the rates of our major trading partners and competitors.

OECD Overall Rank	Country/State	Federal Rate Adjusted	Top State Corporate Tax Rate	Combined Federal and State Rate (Adjusted) (a)
	Iowa	35	12	41.6
	Pennsylvania	35	9.99	41.5
	Minnesota	35	9.8	41.4
	Massachusetts	35	9.5	41.2
	Alaska	35	9.4	41.1
	New Jersey	35	9.36	41.1
	Rhode Island	35	9	40.9
	West Virginia	35	9	40.9
	Maine	35	8.93	40.8
	Vermont	35	8.9	40.8
	California	35	8.84	40.7
	Delaware	35	8.7	40.7
	Indiana	35	8.5	40.5
	New Hampshire	35	8.5	40.5
	Wisconsin	35	7.9	40.1
	Nebraska	35	7.81	40.1
	Idaho	35	7.6	39.9
	New Mexico	35	7.6	39.9
	Connecticut	35	7.5	39.9
	New York	35	7.5	39.9
	Kansas	35	7.35	39.8
	Illinois	35	7.3	39.7
	Maryland	35	7	39.6
	North Dakota	35	7	39.6
1	Japan	30	11.56	39.54
	Arizona	35	6.968	39.5
	North Carolina	35	6.9	39.5
	Montana	35	6.75	39.4
	Oregon	35	6.6	39.3
2	United States	35	6.57	39.27
	Arkansas	35	6.5	39.2
	Tennessee	35	6.5	39.2
	*Washington	35	6.4	39.2
	Hawaii	35	6.4	39.2
3	Germany	26.38	17.0	38.9
	*Michigan	35	6	38.9
	Georgia	35	6	38.9
	Kentucky	35	6	38.9
	Oklahoma	35	6	38.9
	Virginia	35	6	38.9
	Florida	35	5.5	38.6
	Louisiana	35	8	38.5
	Missouri	35	6.25	38.4
	Ohio	35	5.1	38.3
	Mississippi	35	5	38.3
	South Carolina	35	5	38.3
	Utah	35	5	38.3
	Colorado	35	4.63	38.0
	Alabama	35	6.5	37.8
4	Canada	22.1	14	36.1
	*Texas	35	1.6	36.0
	Nevada	35	0	35.0
	South Dakota	35	0	35.0
	Wyoming	35	0	35.0
5	France	34.43	0	34.4
6	Belgium	33.99	0	33.99
7	Italy	33	0	33
8	New Zealand	33	0	33
9	Spain	32.5	0	32.5
10	Luxembourg	22.88	7.5	30.38
11	Australia	30	0	30
12	United Kingdom	30	0	30
13	Mexico	28	0	28
14	Norway	28	0	28
15	Sweden	28	0	28
16	Korea	25	2.5	27.5
17	Portugal	25	1.5	26.5
18	Finland	26	0	26
19	Netherlands	25.5	0	25.5
20	Austria	25	0	25
21	Denmark	25	0	25
22	Greece	25	0	25
23	Czech Republic	24	0	24
24	Switzerland	8.50	14.64	21.32
25	Hungary	20	0	20
26	Turkey	20	0	20
27	Poland	19	0	19
28	Slovak Republic	19	0	19
29	Iceland	18	0	18
30	Ireland	12.5	0	12.5
*Michigan, Texas and Washington have gross receipts taxes rather than traditional corporate income taxes. For comparison purposes, we converted the gross receipts taxes into an effective CIT rate. See footnote 2 for methodology.
(a) Combined rate adjusted for federal deduction of state taxes paid

Source: OECD, http://www.oecd.org/dataoecd/26/56/33717459.xls

For details: http://www.taxfoundation.org/publications/show/22917.html

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Tax Foundation Testifies Before Pennsylvania Legislature on Governor's Plan to Stimulate Economy

Wed, 05 Mar 2008 00:00:00 EST

For more information, contact: Bill Ahern at (202) 464-5101.

Last week Tax Foundation Tax Counsel Joseph Henchman testified before the Pennsylvania House Republican Policy Committee on Governor Rendell's proposal to stimulate the state's economy.

Henchman told the committee that the governor's plan is not the right prescription for Pennsylvania, for several reasons, and explained that, "Any plan that purports to stimulate Pennsylvania's economy and invest in the future which does not cut the corporate income tax rate just isn't serious."

Read the testimony here. Click here for more on Pennsylvania taxes.

Virginia Supreme Court Rules that Giving Power to Tax to an Unelected Body is Unconstitutional

Fri, 29 Feb 2008 00:00:00 EST

For more information, contact: Bill Ahern at (202) 464-5101.

This morning (Feb. 29), the Virginia Supreme Court unanimously held that the Northern Virginia Transportation Authority (NVTA) is unconstitutional in Marshall v. NVTA.

The court found that the NVTA, created in 2002 and given the power to tax in 2007, exceeded its powers when it levied seven taxes on residents of Northern Virginia. The taxes will have to be refunded in their entirety. They are:

Grantors Tax on Home Sales = .40 cents/$100 value
Motor Vehicle Rental Tax = 2% of rental rate
Transient Occupancy Tax = 2% of hotel rate
Safety Inspection "Fee" = $10 annually
Sales Tax on Auto Repairs = 5% of labor charges
Regional Registration "Fee" = $10 annually
Initial Vehicle Registration "Fee" = 1% of value

The Tax Foundation recently authored a report arguing that the NVTA violated taxpayer protection provisions of the Virginia Constitution, including:

Measures to raise taxes or borrow money must be approved publicly by elected officials, with votes recorded. This helps ensure that taxes and borrowing are scrutinized publicly and enjoy a broad range of support beyond that of a narrow special interest.
Laws cannot embrace more than one object. "Single-object" or "single-subject" rules are in virtually every state constitution, and they arose in "the 1830s to eliminate the evils of ‘logrolling' and ‘omnibus bills,' and to ensure separate consideration by the legislature for distinct proposals."

The court sided with NVTA on the one-object rule argument. The bill giving the NVTA the power to tax listed a variety of unrelated subjects (including funding professor salaries at Virginia Tech), and at the last minute the phrase "relating to transportation" was added to the title to attempt a veneer of constitutionality. The court held that this empty gesture was sufficient: "Our examination of the subjects included in Chapter 896 reveals that those subjects are congruous and have a natural connection with the subject of transportation expressed in the title." This effectively nullifies the one-object rule as a restraint on government power.

However, the taxpayer argument regarding the nondelegation doctrine prevailed. First, the court held that all seven assessments were properly labeled as taxes, an argument the Tax Foundation specifically made. "We consistently have held that when the primary purpose of an enactment is to raise revenue, the enactment will be considered a tax, regardless of the name attached to the act.... [W]e conclude that each of the regional taxes and fees provided in Chapter 896 constitutes a tax, because they all are designed to produce revenue to be used for the purpose of financing bonds and supplying revenue for transportation purposes in the Northern Virginia localities."

Next, the court concluded that the legislature had given total discretion over whether to impose the taxes to the NVTA. "Although the General Assembly can later pass a law to amend or repeal NVTA's authority to impose taxes, this does not negate the fact that the sole discretion to impose the regional taxes and fees presently rests with NVTA." Because taxes many only be imposed by the General Assembly, the taxes were therefore void. "The constraints that the citizens of Virginia have placed upon the General Assembly regarding the imposition of taxes would be rendered meaningless if the General Assembly were permitted to avoid compliance with these constraints by delegating to NVTA the decisional authority whether to impose taxes. Thus, although the Constitution does not explicitly prohibit the delegation of such decisional authority concerning the imposition of taxes, that delegation is prohibited by necessary implication, and the General Assembly may not delegate its taxing power to a non-elected body such as NVTA."

The Court concluded: "[B]y enacting Chapter 896, the General Assembly has failed to adhere to the mandates of accountability and transparency that the Constitution requires when the General Assembly exercises the legislative taxing authority permitted by the Constitution."

Read the Tax Foundation's report on the NVTA case here.

Tax Foundation Answers Legal Questions behind Northern Virginia Transportation Tax Dispute

Wed, 13 Feb 2008 00:00:00 EST

Case highlights use of non-legislative bodies to enact new taxes

For more information, contact: Bill Ahern at (202) 464-5101.

WASHINGTON, February 13, 2008 - As residents of Northern Virginia begin to pay seven new taxes implemented by a non-elected body, the Virginia Supreme Court is considering whether or not these new taxes are constitutional. The Tax Foundation, the tax policy research group based in Washington, D.C., released a paper today discussing the legal challenge and highlighting the use of non-legislative bodies to "get around" taxpayer protection statutes.

"The concept of taxation with representation is as American as apple pie," said paper author and Tax Foundation legal counsel Joseph D. Henchman. "The Northern Virginia Transportation Authority is an unelected body that has imposed $326 million in stealth taxes. Virginia requires tax increases to be passed by a popular vote for a reason, and these types of taxpayers protections should, and legally must, be protected."

Voters had on several occasions previously rejected the types of taxes imposed by the Northern Virginia Transportation Authority (NVTA), but legislators simply imposed them anyway. This violated three specific constitutional taxpayer-protection provisions, which allow only elected officials to raise taxes and issue debt and only following approval by popular vote.

Legislators circumvented the final constitutional protection designed to prevent "kitchen sink" style omnibus bills by limiting laws to only one subject matter. The phrase "relating to transportation" was added to the title so that the bill would meet the required rule. However, this legislation included, among other things, funding for salaries of professors at Virginia Tech.

"A mere shift in wording should not be enough to overcome constitutional protections," Henchman continued. "Northern Virginians cannot vote out the NVTA Board as such, and the NVTA should not be able to exercise powers constitutionally denied to other governmental entities."

Oral arguments were heard by the state Supreme Court on January 8, 2008, after a lower court judge (Judge Benjamin Kendrick) had ruled the NVTA to be constitutional. A ruling is expected in late spring.

The case has broader implications nationwide, as many states have similar forms of taxpayer protections. Many states have been looking for small and subtle ways to increase tax revenues to address budgetary issues, making the likelihood of other such "authorities" appearing much higher.

The full paper, Special Report #159, is available online at: http://www.taxfoundation.org/publications/show/22945.html.

New Podcast on the Incidence of Corporate Taxes

Thu, 17 Jan 2008 00:00:00 EST

For more information, contact: Bill Ahern at (202) 464-5101.

A new Tax Foundation Podcast examines the incidence of corporate taxation and asks the question, "Who bears the burden of corporate taxes? Workers? Consumers? Shareholders?" Tax Foundation Vice President for Economic Policy Robert Carroll discusses this topic with Dr. William Gentry, professor of economics at Williams College and author of a recent Treasury Department paper titled A Review of the Evidence on the Incidence of the Corporate Income Tax. Dr. Gentry discusses the growing academic evidence that suggests the burden of the corporate tax is increasingly falling on labor and impacting workers directly.

Click here to listen to the podcast. Click here for more on corporate taxes.

Long-Term Growth Better for Economy than Short-Term Fiscal Fixes

Fri, 11 Jan 2008 00:00:00 EST

Cutting corporate tax rate better stimulus for workers, economy

For more information, contact: Bill Ahern at (202) 464-5101.

WASHINGTON, January 10, 2007 — As presidential candidate Hillary Clinton unveils her fiscal economic stimulus package today, and talk of packages from Congress and the president continues to circulate, the Tax Foundation released its outlook on the best ways to shore up the economy and promote long-term growth. The proposal frowns on short-term fiscal stimulus in favor of a long-term solution: lowering the corporate tax rate, currently the second highest in the industrialized world.

"While a stimulus package might be politically popular as extraneous spending and tax provisions are added to it," said Dr. Robert Carroll, Tax Foundation vice president for economic policy, "stimulus packages are often ill-timed, poorly-crafted, and do little to boost the economy. Sound monetary policy should be used in the short run to help stabilize the economy."

In his report, Tax Foundation Fiscal Fact No. 115, Dr. Carroll discusses some of the problems with fiscal stimulus , such as a temporary tax cuts or an expansion of government spending. He points out that such proposals might in the end have a negligible impact on the economy, and perhaps worse yet, be a distraction from the more fundamental problems facing our economy.

"Shoring up the economy is important, but our attention also should be focused on the problems our economy faces in the longer term," Carroll continued. "Reevaluating our business tax system in the context of global competitiveness is an issue important to American workers and living standards. A wave of corporate tax rate cuts has swept across Europe and Asia , leaving the U.S. behind. Our business tax system is becoming outdated and the United States may be losing ground to its major competitors. A decade and a half ago the U.S. was a low-tax rate country, but that's no longer the case. The reality is that the United States now has the second highest corporate tax rate in the industrialized world."

Added Scott Hodge, Tax Foundation President: "Our high corporate tax rate will continue to bog the American economy down if real and significant action isn't taken. Addressing that structural problem is the best way to help American workers and our economy for years to come. If we really want to help American workers and our economy, now is the time to act."

The full report is available online at: http://www.taxfoundation.org/publications/show/22859.html

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Dr. Robert Carroll Joins the Tax Foundation as Vice President for Economic Policy

Mon, 07 Jan 2008 00:00:00 EST

For more information, contact: Bill Ahern at (202) 464-5101.

WASHINGTON, January 7, 2007 - The Tax Foundation announced today that Dr. Robert Carroll had joined its staff as Vice President for Economic Policy. Dr. Carroll will oversee the Tax Foundation's tax research program, with a special focus on business taxation and the need for corporate tax reform.

"As someone who has often used and always respected the Tax Foundation's work, I'm excited to now take part in that work," said Dr. Carroll. "This position is a great fit for me, as I will be able to continue doing what I've always done: making the case for sound tax policy."

Dr. Carroll most recently served as the Deputy Assistant Secretary for Tax Analysis in the Office of Tax Policy at the Department of the Treasury, a position he began in December of 2003.

Previously, he had been a Visiting Scholar in the Tax Analysis Division of the Congressional Budget Office. From July 2002 to June 2003 he served as a Senior Economist (Public Finance) with the President's Council of Economic Advisers.

He holds a Ph.D. and a master's degree in economics from Syracuse University and a B.S. in economics from State University of New York.

"We're delighted to have Bob on our team," said Scott Hodge, president of the Tax Foundation. "His wealth of experience and keen intellect will make him an invaluable asset for our organization. I look forward to working with Bob in continuing our 70-year tradition of advocating sound tax policy at the state and federal level."

The nonpartisan, nonprofit Tax Foundation has monitored tax policy at the federal, state and local levels since 1937. Best known for its annual calculation of Tax Freedom Day, the Tax Foundation is a nonprofit, nonpartisan 501(c)(3) organization.

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AMT Patch Finally Receives Congressional Approval, Sparing Taxpayers Higher Taxes and Delayed Refunds

Wed, 19 Dec 2007 00:00:00 EST

Congressional crisis highlights failures of complex tax code, ‘paygo' rules

For more information, contact: Bill Ahern at (202) 464-5101.

WASHINGTON, December 19, 2007 -- With a new tax year looming just 12 days away, the House of Representatives today passed the long-anticipated Alternative Minimum Tax (AMT) "patch." This version of the legislation, which President Bush has indicated he will sign and which has already been approved by the Senate, will essentially prevent any new taxpayers from facing a tax liability under AMT. The Tax Foundation, the nonpartisan, nonprofit tax policy research group in Washington, highlighted the fact that the AMT crisis shines yet another bright light on the need for fundamental tax reform.

"Save the stories written today about AMT, because you'll be able to recycle them next year," said Scott Hodge, Tax Foundation president. "Crises like these happen because the tax code is such an unwieldy, uncontrollable mess. Sound tax policy requires these one-year fixes, gimmicks, and patches to end. It's time for a permanent solution—one that takes the best features of AMT and the current tax code and merges them into one simpler and fairer system."

The bill passed today was an important step for both taxpayers and the IRS. For taxpayers, it protected millions of new taxpayers from being thrust into AMT and thus facing a markedly higher tax burden. The bill essentially holds constant for tax year 2007 the number of returns that faced AMT in tax year 2006. The IRS will be spared a mad scramble that would have come with the new influx of taxpayers in AMT. Additionally, the Treasury Department indicated that the delay in implementation of the AMT patch likely would have delayed refunds this coming tax filing season.

Much of the debate centered on the House Democrats' "pay as you go" or "paygo" rules. Those rules require that every decrease in taxation be paired with an equivalent decrease in spending or an increase in a different tax. The President indicated that he would not sign an AMT patch bill that included tax increases.

"Budget rules that keep government spending in check are a good idea, but the current ‘paygo' rule simply isn't working," Hodge continued. "It has bitten Congress and the taxpaying public, forcing a long delay in passage of an AMT patch that will spare taxpayers and the IRS the trouble of dealing with 21 million new AMT forms."

The Tax Foundation has been a frequently cited commenter on the Alternative Minimum Tax and the complexities of the tax code more broadly. This year, the Tax Foundation has released two primers on the AMT, one detailing common questions about the AMT and another offering a revenue-neutral solution. All of the Tax Foundation's work on the AMT is available online at: http://www.taxfoundation.org/research/topic/118.html.

The Tax Foundation has also released a report showing the impact of the AMT patch on hypothetical American families. That report is available online at: http://www.taxfoundation.org/research/show/22801.html.

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Clarifying Misconceptions about Tax Progressivity

Fri, 14 Dec 2007 00:00:00 EST

For more information, contact: Bill Ahern at (202) 464-5101.

Debates over tax policy often contain misleading—or simply false—claims about who pays how much in taxes. The Tax Foundation has published a new Fiscal Fact in response to some recent rhetoric from public figures claiming the rich don't pay their fair share.

Many people simply don't realize that the wealthy already shoulder a disproportionately large share of the tax burden. For example, in 2003, the wealthiest 1 percent of taxpayers paid over 20 percent of the federal taxes despite earning just 14 percent of the nation's income.

Read the new Tax Foundation Fiscal Fact, "Buffett's Facts Are Wrong: Top 1% Now Paying Record Level of Taxes." Click here for more on how much tax various income groups pay.

Tax Foundation - Press Room

First Hard Numbers on Obama Tax Plan Show Dramatic Tax Redistribution

Presidential Election Campaign Fund Untapped by Obama Claims Little Support from Taxpayers

Tax Foundation Study: Obama Plan to Lift Social Security Wage Tax Ceiling Would Hit High-Income States

Tax Foundation Research Helps Clarify the Gas Tax Debate

Tax Foundation Urges a Stop to South Dakota's Discriminatory Insurance Taxes

New Testimony: Tax Foundation Tells Congress that Fundamental Tax Reform Is Still Tax Policy's Most Important Long-Term Goal

States Should Avoid Sales Taxes on Nonprofit Hospital Purchases

Tax Freedom Day to Arrive April 23 in 2008

Maryland Puts Final Touch on Historic Tax Hike

New Study of Mississippi Tax Policy Urges Simplification

Senate's New Housing Tax Goodies Are Bad Tax Policy

An Economic Analysis of Georgias Tax Cut Proposals

New Podcast on Corporate Capital Gains Taxes

Tax Foundation Criticizes North Carolina Lottery Ruling

New Study: U.S. States Suffer as They Become Biggest Corporate Taxers in the World

Tax Foundation Testifies Before Pennsylvania Legislature on Governor's Plan to Stimulate Economy

Virginia Supreme Court Rules that Giving Power to Tax to an Unelected Body is Unconstitutional

Tax Foundation Answers Legal Questions behind Northern Virginia Transportation Tax Dispute

New Podcast on the Incidence of Corporate Taxes

Long-Term Growth Better for Economy than Short-Term Fiscal Fixes

Dr. Robert Carroll Joins the Tax Foundation as Vice President for Economic Policy

AMT Patch Finally Receives Congressional Approval, Sparing Taxpayers Higher Taxes and Delayed Refunds

Clarifying Misconceptions about Tax Progressivity

An Economic Analysis of Georgias Tax Cut Proposals

Long-Term Growth Better for Economy than Short-Term Fiscal Fixes