How Citizens for Tax Justice Models the Impact of Tax Proposals

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Over the course of the year, CTJ has published a series of analyses estimating the revenue impact of tax plans proposed by half a dozen Republican presidential candidates. It published a summary of the findings earlier today in a blog post.

These findings have sensibly drawn a lot of media attention, and the first question CTJ staff usually gets is “how do you come up with these numbers?” Here’s a quick answer to this question.

The starting point for Citizens for Tax Justice and the Institute on Taxation and Economic Policy’s work is the ITEP Microsimulation Model. This is a computer model built on a large database of more than 150,000 records, each representing a tax payer’s actual federal tax return.  Since 1960, the Internal Revenue Service (IRS) has made these databases available to researchers seeking to understand the nation’s tax system and the impact of proposed changes.

The result is a researcher’s dream: mountains of data showing everything from basic data on wages and capital gains to details of itemized deductions and business tax breaks.

Starting with this database’s economic profile of the incomes of all Americans, the ITEP model can easily be used to estimate the effect of different tax rules. With a point and a click, the ITEP model can show the effect of, for example, increasing the top capital gains tax rate from 20 to 25 percent, or repealing the itemized deduction for charitable contributions on the taxes paid by every single one of these 150,000 records. The result is a statistically valid estimate of how much federal tax revenues would increase (or fall) as a result of such a tax change, which means we can use the model to generate revenue estimates on federal tax reform plans.

Because we know the income levels of every single one of these records, we can also use these results to show how tax changes would affect different income groups, from the poorest twenty percent to the very wealthiest 1 percent.

The ITEP model produces a traditional or “static” revenue estimate, meaning that in general it does not calculate how tax changes affect behavior as does “dynamic” modeling. The latter is a type of modeling advocated by those who support supply-side economic theories, which claim dramatic tax changes will spur economic growth. But as we have noted elsewhere, economists can’t agree on whether such an effect exists, which means that the most responsible approach to revenue estimating is to present a static analysis.

Taken on its own, the ITEP Model can only analyze changes in taxes that already exist at the federal level. This means that when we want to analyze an entirely new proposed tax at the federal level, such as a value-added tax or a national sales tax, we supplement the model using other data sources to augment the economic profile we get from the IRS’ income tax database.

We use a similar process to analyze taxes levied by state and local governments, such as property taxes and sales and excise taxes, that aren’t included in the IRS data. 

2016 Presidential Candidates’ Plans and Records on Taxes

December 15, 2015 03:09 PM | | Bookmark and Share

Democrats

Republicans

Hillary Clinton

Donald Trump

 

 

 

 

  Dropped Out  

Lincoln Chafee

Ted Cruz

John Kasich

Jim Webb

Marco Rubio

Chris Christie

Martin O’Malley

Ben Carson

Jeb Bush

Bernie Sanders

Rick Santorum

George Pataki

 

Rand Paul

Bobby Jindal

 

Mike Huckabee

Lindsey Graham

 

Rick Perry

Scott Walker

 

Carly Fiorina

Jim Gilmore

As the 2016 presidential race heats up, Citizens for Tax Justice will dig deep into  candidates’ records and analyze their current policy positions on tax issues. We’ve closely followed the work of many current and potential candidates in recent years, in many cases providing detailed distributional analyses of their tax plans and proposals.

Below is a repository of our reports, blog posts and tax plan analyses. 

 

 

 

 

 

 

 

 


 

Democrats

Hillary Clinton

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“Clinton has frequently shown a willingness to take a stand for tax fairness but has never fleshed out a clear agenda on these issues and has occasionally embraced regressive or gimmicky tax policies.”

Hillary Clinton’s New Tax Proposals: Steps Toward Making the Wealthy Pay Their Fair Share – January 14, 2016

Press Statement: Clinton Tax Reform Proposals Are a Step Toward Tax Fairness – January 12, 2016

Hillary Clinton’s Tax Proposal is Right on Inversions, Wrong on New Tax Cuts – December 11, 2015

Hillary Clinton Would Limit Tax Breaks for the Well-Off to Make College More Affordable – August 19, 2015

What We Know About Hillary Clinton’s Positions on Tax Issues – April 11, 2015

Clinton Family Finances Highlight Issues with Taxation of the Wealthy – June 26, 2014

The Clinton-McCain Gas Tax Proposal: Get Half a Tank Free This Summer – May 2, 2008

Who’s Rich? – January 16, 2008

What the Presidential Candidates Are Saying about Taxes: Update – November 30, 2007

Democratic Presidential Candidates Address Fiscal Issues in Debates – September 28, 2007

Battle Only Beginning Over the “Carried Interest” Tax Loophole for Billionaire Fund Managers – October 12, 2007

The Presidential Candidates on Taxes – August 17, 2007

Presidential Candidates Weigh in on Wealthy’s Taxes – June 29, 2007

A Congressional Tax Report Card – October 2006

Hillary Clinton takes on the Bush tax cuts – July 11, 2005


Bernie Sanders

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“Senator and now presidential candidate Bernie Sanders has one of the strongest records of any elected official when it comes to standing up for tax fairness. In many cases, Sen. Sanders has been the lone voice in the Senate fighting for legislation that would ensure that corporations and the wealthy pay their fair share.”

Bernie Sanders’ Health Care Tax Plan Would Raise $13 Trillion, Yet Increase After-Tax Incomes for All Income Groups except the Very Highest – February 8, 2016

The Tax (and Wage) Implications of Bernie Sanders’ “Medicare for All” Health Plan – February 8, 2016

News Release: Sen. Bernie Sanders’ Tax Proposal Would Increase Federal Revenue and Increase after Tax Wages for All but the Top 5 Percent – February 8, 2016

Bernie Sanders is a Champion for Tax Fairness – May 1, 2015

State-by-State Estate Tax Figures Show Why Congress Should Enact Senator Sanders’ Responsible Estate Tax Act – September 22, 2014

The Estate Tax Is Not Doing Enough to Mitigate Inequality: State-by-State Figures – September 22, 2014

Best and Worst Ideas for “Blank Slate” Tax Reform – July 30, 2013

Bernie Sanders Is Right and the Tax Foundation Is Wrong: The U.S. Has Very Low Corporate Income Taxes– April 23, 2013 

CTJ’s Bob McIntyre Applauds New Bill to End Deferral of Taxes on Offshore Corporate Profits – February 7, 2013

Citizens for Tax Justice Joins Over 70 Organizations in Support of the Responsible Estate Tax Act – July 30, 2010

House Democrats’ Stimulus Bill Would Rescind the “Wells Fargo Ruling” – January 28, 2009

Congress Should Approve Bills Introduced in House and Senate to Shut Down Treasury’s $140 Billion Give-Away to Banks – November 24, 2008


Martin O’Malley

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“At a time when many governors stubbornly rejected new revenues despite their states’ weak fiscal positions, former Maryland Gov. Martin O’Malley’s was one of only a few governors who championed tax increases to preserve his state’s public investments even during the Great Recession.”

Martin O’Malley’s Record on Taxes is Progressive – May 30, 2015

Study: Recent EITC Expansion in MD will Make Taxes More Fair, Reduce Inequality – May 15, 2014

Chart: New Gas Tax Plan in Maryland House of Delegates – March 19, 2013 

Chart: Maryland Governor O’Malley’s New Gas Tax Plan – March 6, 2013

New From ITEP: Maryland Tax Bill Would Improve Tax Fairness and Revenue – May 16, 2012

Maryland’s Governor O’Malley is Right: Digital Downloads Don’t Need a Special Tax Break – January 27, 2012

Maryland Commission Omits Indispensible Piece of Gas Tax Reform: Credits for Low Income Families – October 27, 2011

Five Reasons to Reinstate Maryland’s “Millionaires’ Tax” – March 9, 2011

Gubernatorial Candidates with Progressive Positions on Taxes Who Won – November 5, 2010

Out of Control Tax Credits Demonstrate Need for Greater Oversight – December 11, 2009

Another Example of the Power of Service Sector Lobbyists – April 11, 2008

New York and Maryland Consider Taxes on Wealthiest Residents – March 21, 2008

Maryland Tax Changes: Glass Half Full – November 20, 2007

Senate Plan Falls Hardest on Low-Income Marylanders – November 7, 2007

Tax Reform Debate Underway in Maryland – November 5, 2007

More Details Emerge on Maryland Governor’s Tax Plan – October 5, 2007

Maryland Governor Proposes to Close Fiscal Gap with Regressive Taxes — and A Few Progressive Ones, Too – September 21, 2007

Tax Reform? No. Save an Antiquated Pastime that Can’t Support Itself? Yes. – August 24, 2007

Maryland: Save the Poor Horse Racetracks? – August 22, 2007

 

Lincoln Chaffee

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“As a presidential candidate running for the Democratic nomination in 2016, Lincoln Chafee has yet to lay out a vision on tax issues, so the only indications so far of what his positions may be lie within his record as a former U.S. Senator and Governor in Rhode Island. And the evidence suggests that Chafee largely supported fiscally responsible tax policies, even when such positions were unpopular among his fellow lawmakers.”

Lincoln Chafee’s Record of Fiscal Responsibility – June 19, 2015

Few Winners and Many Losers in Rhode Island Tax Reform – June 9, 2014

Are Special Tax Breaks Worthwhile? Rhode Island Intends to Find Out – July 17, 2013

Convention Speaker Profiles: Govenors Perdue, Quinn, Chafee, Patrick & O’Malley – September 4, 2012

Governors Class of 2012: Honors Students and Class Clowns – July 12, 2012

Raising Revenue from High-Income Households in Rhode Island – March 7, 2012

A More Modern Day Sales Tax – March 7, 2012

How Rhode Island Didn’t Do the Wise Thing When It Had the Chance – June 30, 2011

Sales Tax Reform Debated in Rhode Island – April 15, 2011

A 21st Century Sales Tax: Why Governor Chafee’s plan to modernize the sales tax is necessary – March 11, 2011

Rhode Island Governor Would Improve Tax System, But Could Do Better – March 11, 2011

Gubernatorial Candidates with Progressive Positions on Taxes Who Won – November 5, 2010

A Congressional Tax Report Card – October 2006

Trifecta Falls Short – August 7, 2006

 

Jim Webb

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“When it comes to tax reform, former Virginia senator and Democratic presidential candidate Jim Webb has publicly discussed conflicting views.  Webb has proposed taxing investment income at the same higher tax rate that applies to wages. He has also proposed ending offshore profit-shifting by multinational corporations by closing the “deferral” loophole. On the other hand, Webb suggests that the nation should consider “shifting our tax policies away from income and more toward consumption.” Such policies would be highly regressive.”

Jim Webb’s Confusing Stance(s) on Taxes – July 8, 2015

Senate Republicans & Five Democrats Block Full Tax Cut Extension for 98% of Taxpayers & UI Benefits – December 6, 2010

Senate Candidates Talk Taxes – October 18, 2006

 


 

Republicans

 

Jeb Bush

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“Jeb Bush’s tax reform rhetoric is far more salient than his actual plan. He derides special interest giveaways and crony capitalism but then outlines a plan riddled with special interest giveaways and crony capitalism ideals.”

Jeb Bush’s Tax Plan Gives Top 1% Average Tax Cut of Nearly $180,000 – October 28, 2015

More Than Half of Jeb Bush’s Tax Cuts Would Go To the Top 1% – September 11, 2015

Bush and Trump’s “Populist” Tax Rhetoric Is All Talk – September 10, 2015

Jeb Bush’s Tax Plan Is a Corporate Giveaway Disguised as Tax Reform – September 9, 2015

Jeb Bush Loves Tax Cuts, Especially for the Rich – July 9, 2015

The Tax Cheaters Lobby – November 13, 2002

 

Donald Trump

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“Yet another presidential candidate is making a mockery of populism by trumpeting a massive tax break for the rich as a plan that will benefit average Americans. The top 1 percent of Americans will receive an average tax break of $227,000 per year while the bottom 20 percent will receive an average tax cut of only $250. Trump claims the plan will be revenue neutral, but he has made bombastic exaggerations before and this time is no different. In fact, there is no possibility that this plan would not be a gigantic tax cut for the rich and a gigantic revenue loser for the government.”

Donald Trump’s Tax Plan Would Cost $12 Trillion – March 17, 2016

The Net Effect: Paying for GOP Tax Plans Would Wipe Out Income Gains for Most Americans – March 9, 2016

Trump’s Criticism of Jeff Bezos as a Tax Dodger is Half-Right – December 9, 2015

Donald Trump’s $12 Trillion Tax Cut – November 4, 2015

Brownback on Steroids? Donald Trump’s Plan to Cut Taxes on “Pass-Through” Businesses–And Hedge Fund Millionaires – September 29, 2015

CTJ Statement: Trump Tax Plan Would Cost Nearly $11 Trillion Over 10 Years – September 28, 2015

Bush and Trump’s “Populist” Tax Rhetoric Is All Talk – September 10, 2015

What Trump Gets All Wrong About Immigration and Taxes – August 25, 2015

Donald Trump’s Regressive and Retrograde Tax Plan – June 22, 2015

 

Ben Carson

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“Dr. Ben Carson enters the Republican presidential field without any significant legislative experience so he doesn’t have a record on tax policy. But in a 2013 op-ed, the well-respected neurosurgeon explained his avid support for a flat tax system. The case Carson made for the flat tax is based on a number of falsehoods about our current tax system and how a flat tax would work in practice.” 

Dr. Ben Carson enters the Republican presidential field without any significant legislative experience so he doesn’t have a record on tax policy. But in a 2013 op-ed, the well-respected neurosurgeon explained his avid support for a flat tax system. The case Carson made for the flat tax is based on a number of falsehoods about our current tax system and how a flat tax would work in practice. “

Ben Carson’s Flat Tax Plan Would Cost $9.6 Trillion, While Increasing Taxes on Low-Income Families – January 6, 2016

Ben Carson’s 10 Percent Flat Tax is Utterly Implausible – September 1, 2015

Presidential Candidate Dr. Ben Carson Once Avidly Argued for a Flat Tax — And Got the Facts Wrong – May 5, 2015

 

Carly Fiorina 

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“Based on what we know from her time as a corporate CEO and a candidate for the U.S. Senate, Fiorina’s call for the public to stand up to the political class may be all talk. Instead, she may ally with corporate influencers.”

Carly Fiorina Has Toed the Party Line on Taxes – May 11, 2015

 

Marco Rubio

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“Sen. Rubio’s newest tax deform plan is a much larger version of his gimmicky tax proposals of years past. In each case, he attempts to get credit for touting tax cuts, while at the same time hiding the real cost of his proposals. The crucial difference this time around is the sheer scale of the damage his tax reform plan would do to tax fairness, public programs and the U.S. economy if it were ever enacted.”

The Net Effect: Paying for GOP Tax Plans Would Wipe Out Income Gains for Most Americans – March 9, 2016

Marco Rubio’s Tax Plan Gives Top 1% An Average Tax Cut of More than $220,000 a Year – November 3, 2015

Marco Rubio: The Great Tax Deformer – April 14, 2015

Anti-Tax Grandstanding of Olympic Proportions – August 3, 2012

The Olympic Tax Exemption: It Gets Worse – August 9, 2012

California Lawmakers Stumble in Quest for Tax-Complexity Gold – August 20, 2012

Florida: Rubio on User Fees – December 4, 2007


Ted Cruz

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“Texas Senator, and now presidential candidate, Ted Cruz is a supporter of radical tax plans that would dramatically increase taxes on poor and middle class Americans in order to pay for huge tax cuts for the wealthiest Americans.”

 

Ted Cruz’s Tax Plan Would Cost $13.9 Trillion, While Increasing Taxes on Most Americans – March 16, 2016 

The Net Effect: Paying for GOP Tax Plans Would Wipe Out Income Gains for Most Americans – March 9, 2016

Ted Cruz’s Tax Plan Would Cost $16.2 Trillion over 10 Years–Or Maybe Altogether Eliminate Tax Collection – November 12, 2015

How Presidential Candidate Ted Cruz Would Radically Increase Taxes on Everyone But the Rich – March 23, 2015

Republican National Committee Wants to Abolish the IRS – September 5, 2014

 

 

Rand Paul

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“No member of Congress has been more active in the cause of protecting tax cheaters and tax avoidance by our nation’s wealthiest individuals and corporations than Sen.(now presidential candidate) Rand Paul.”

Detractor Dangles Shiny Objects to Obscure Facts about Rand Paul’s Deficit-Inflating Flat Tax Proposal – June 19, 2015

Rand Paul’s Tax Plan Would Blow a $15 Trillion Hole in the Federal Budget – June 18, 2015

Rand Paul’s Record Shows He’s a Champion for Tax Cheats and the Wealthy – April 7, 2015

Press Statement: Boxer-Paul Repatriation Proposal Would Reward Corporate Tax Scofflaws – January 29, 2015

Republican National Committee Wants to Abolish the IRS – September 5, 2014

Reid-Paul “Transportation Funding Plan” is No Plan at All – June 11, 2014

Good and Bad Proposals to Address the Highway Trust Fund Shortfall – June 19, 2014

Republican Platform Now Endorses Gutting Laws that Stop Offshore Tax Evasion – January 23, 2014

The Wrongheaded Quest to Shrink the IRS – July 17, 2013

Yes, What Apple’s Doing in Ireland May Well Be Legal — and That’s the Problem – May 22, 2013

Senator Rand Paul’s Fight for Offshore Tax Havens – May 13, 2013

Senator Rand Paul: Champion of Secret Swiss Bank Accounts – May 2, 2012

 

Mike Huckabee

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“Despite having a relatively moderate record on tax policy as the governor of Arkansas, Mike Huckabee has wholeheartedly embraced a radically regressive tax plan as a central plank of his presidential candidate platform.”

Would the Real Mike Huckabee Please Stand Up? – May 7, 2015

The Republican Presidential Primary: And In This Ring… – December 21, 2007

GOP Debate: Who’s Paying Too Much in Taxes? – December 13, 2007

Mike Huckabee’s Tax Record – December 5, 2007

What the Presidential Candidates Are Saying about Taxes: Update – November 30, 2007

GOP Candidates on Gas Tax Hike: No Way – August 11, 2007

The Presidential Candidates on Taxes – August 17, 2007

Arkansas: Good Words from Governor Huckabee – July 8, 2005

 

Bobby Jindal

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“While Louisiana Governor Bobby Jindal has yet to lay out a specific tax plan in the run up to his presidential campaign announcement, he has fought to reduce taxes for the wealthy and corporations at the expense of everyone else. He outlined his vision in his 2013 plan that sought to eliminate the state’s income tax and replace it with revenue from an expanded sales tax, a reform that would dramatically cut taxes for the wealthy while increasing them for at the expense of low- and middle-income people.”

Bobby Jindal’s Louisiana is a Cautionary Tale for the Nation – June 24, 2015

Louisiana Legislators Try to Avoid the Wrath of Grover Norquist – May 28, 2015

Louisiana Film Tax Credit Costs More Than It Brings In – May 20, 2013

Louisiana Tax Overhaul Collapse as Bellwether? We Can Only Hope. – April 17, 2013

Governor Jindal Admits Defeat, Abandons His Tax Plan – April 9, 2013

This Just In: Louisianans Still Don’t Trust Governor Jindal’s Tax Plan – April 4, 2013

Governor Jindal’s Tax Plan Would Increase Taxes on Poorest 60 Percent of Louisianans – April 1, 2013

Eliminating Louisiana’s Income Taxes Will Hurt the State’s Economy – March 18, 2013

Jindal Leaves Inconvenient Details Out of His Tax Plan – March 15, 2013

“Middle Class Tax Cut” Could Send Wisconsin Down Slippery Slope – February 8, 2013

Beware The Tax Swap – January 24, 2013

Governor Jindal’s Bad Idea for Louisiana Attracts Scrutiny – January 15, 2013

Proposal to Eliminate Income Taxes Amounts to a Tax Increase on Bottom 80 Percent of Louisianans – January 11, 2013

Fewer than Three Percent of Americans Will Pay Health Care “Penalty Tax” — and Anti-Tax Politicians Go Crazy Anyway – September 21, 2012

How Louisiana Celebrates the Second Amendment: A Sales Tax Holiday for Guns – September 7, 2011

Louisiana: Repeal of Income Taxes So Radical Even Governor Jindal Cannot Support It – May 25, 2011

Eliminating State Income Tax: Good for Whom? – June 1, 2009

A Congressional Tax Report Card – October 2006

 

Chris Christie

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“During his five years in office, New Jersey Gov. and now presidential candidate Chris Christie has consistently blocked progressive tax increases and sought to pass regressive and fiscally irresponsible tax cuts. The starkest example of how Gov. Christie has sought to make New Jersey’s tax code more unfair is that he consistently vetoed a small tax rate increase on millionaires but (conveniently until this week) refused to reverse his cuts to the state’s earned income tax credit (EITC). On the federal level, Gov. Christie has similarly laid out a broad tax cut plan that would heavily favor the wealthiest taxpayers while simultaneously slashing federal revenue.”

Chris Christie’s Long History of Opposition to Progressive Tax Policy – June 30, 2015

A Tale of Two Tax Proposals – May 12, 2015 

12 States Could Raise Gas Taxes This Year – January 29, 2015

Tax Increase to Fund Transportation Should Be Combined with Credit to Help Low-Income Families – January 26, 2015

Two of Every Kind of Tax Giveaway – October 23, 2014

Highest-Income New Jerseyans Would Still Pay Lowest Share of Income to Taxes After Proposed Changes – June 25, 2014

A New Wave of Tax Cut Proposals in the States – January 28, 2014

$elling New Jersey $hort: Across-the-Board Income Tax Cut Would Harm the Garden State – January 9, 2014

Will New Jersey Re-elect the Fiscally Reckless Chris Christie? – October 17, 2013

Governor Christie Budget Plan Panned as Gimmick, His Tax Talk Called Puffery – March 6, 2013

Convention Speaker Profile: Governor Chris Christie (R-NJ) – August 28, 2012

Chris Christie, Drama Queen – July 5, 2012

Reality Shatters Chris Christie’s Rose-Colored Glasses – May 24, 2012

State Treasurer Confesses: Our Job is to Protect Millionaires – May 2, 2012

New Jersey Governor Chris Christie Promotes Same Old Tired Arguments for Cutting Taxes – February 23, 2012

Reality Check: Income Taxes Do Not Impede Economic Growth – February 15, 2012

Chris Christie Playing Shell Game With Tax Cuts – February 8, 2012

Failure to Address Gas Tax Costs New Jersey Over a Half a Billion Dollars a Year – December 15, 2011

Governor Christie’s Snooki Situation – October 5, 2011

New York and New Jersey Governors Favor Unpopular Toll Increases, But Oppose Popular Tax Increases – August 25, 2011

Chris Christie’s Veto Pen – Mightier (and Meaner) Than Any Sword – July 14, 2011

New Jersey Gov. Christie Vows to Veto Widely Popular Millionaires’ Tax – June 29, 2011

‘Greetings from Asbury Park, NJ’: Bruce Springsteen Letter Puts Gov. Christie in the ‘Lion’s Den’ – April 8, 2011

Prioritizing Corporations Over People in New Jersey – January 31, 2011

To States Trying to Lure Illinois Businesses: It’s Not Just the Tax Rates, Stupid – January 31, 2011

New Jersey Governor Passes Up $6 Billion in Funds for Subway Tunnel — to Save the State $2.7 Billion – October 8, 2010

New Jersey Governor and CTJ Find (Rare) Agreement on Homebuyer Tax Credit – August 6, 2010

Can New Jersey Cap Hypocrisy on Taxes? – June 25, 2010

Drama with State Film Tax Credits: Propaganda, Criminal Charges, and Sitcom Stars Make Headlines – June 18, 2010

New Jersey Lawmakers to Attempt to Override Governor’s Veto of Millionaire’s Tax – June 18, 2010

 

John Kasich

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“Nine-term congressman and current Ohio Gov. John Kasich has received  accolades for his perceived position as the “moderate” or “compassionate” candidate in the 2016 GOP presidential race. It’s true that he embraced a few policies benefiting low-income families, notably the expansion of Medicaid, but a handful of progressive policies do not a moderate make. The bulk of Kasich’s economic agenda as a governor and former congressman has been pursuing tax cuts for the wealthy and increasing taxes on low- and middle-income families. “

Although He Left out Key Details, It’s Clear Kasich’s Tax Plan Is a Deficit-Busting Giveaway to the Wealthy – October 15, 2015

John’s Kasich’s Uncompassionate Conservatism – August 5, 2015

Gov. Kasich Is a ‘Compassionate’ Tax-Cut-for-the-Rich Conservative – July 21, 2015

Fiscal Shell Game: Lawmakers Proposing Tax Shift Plans To Dupe the Public – February 19, 2015

Gov. Kasich’s Tax Proposal Promises to Make Ohio’s Tax System Less Fair – February 11, 2015

Ohio’s Affluent are Big Beneficiaries of the 2013-2014 Tax Changes – October 31, 2014

Putting a Face to the Numbers – October 23, 2014

Ohio Gov. John Kasich’s Income Tax Plan Fails Reality Test – October 7, 2014

Tax Policy and the Race for the Governor’s Mansion: Ohio Edition – September 12, 2014

Cumulative Impact of Ohio Tax Changes Revealed – August 27, 2014

Out-of-Step – August 26, 2014

The Great Ohio Tax Shift – August 18, 2014

Buckeye State Tax Policy in the News – July 9, 2014

Cuts and Breaks – July 2, 2014

Ohio Tax Cuts Would Disproportionately Benefit Top 1 Percent – May 29, 2014

Income-Tax Repeal: A Bad Deal for Ohio – April 28, 2014

Problems with Ohio EITC: It’s not refundable, it has a cap, and it’s too low – April 3, 2014

Big News in Ohio: Governor’s Unfair Tax Cut Plan Unveiled – March 21, 2014

Kasich Tax Plan: Advantage, Top 1 Percent – March 14, 2014

Either Way – Reducing Ohio’s Top Income Tax Rate to 4 or 5 Percent is a Bad Idea – February 19, 2014

Cutting taxes doesn’t help Ohio economy – February 18, 2014

Income-tax cut would favor well-to-do – February 13, 2014

Will Ohio Medicaid Savings End Up as Tax Cut for the Rich? – November 13, 2013

Another Ohio tax cut for the affluent – October 29, 2013

A Credit that counts – October 21, 2013

Bad Budgets Become Law in Ohio and Wisconsin – July 1, 2013

Tax plan still rewards affluent, leaves some of poorest Ohioans paying more – June 26, 2013

New plan would cut taxes $6,000 a year on average for Ohio’s most affluent – June 25, 2013

Income-tax cut would favor affluent Ohioans- Middle-income residents on average would get $51 a year – April 22, 2013

Kasich tax proposal would further tilt tax system in favor of Ohio’s affluent – February 7, 2013

Voters Asked to Make Up Local Revenues States Stopped Providing – November 2, 2012

Income-tax cut would favor affluent; Middle-class Ohioans wouldn’t get enough for a tank of gas – March 19, 2012

Bad Idea in Ohio: Pay For Income Tax Cut with a Fracking Tax – March 15, 2012

Cuts Are the Wrong Answer, Governor Kasich; Here’s a Better One – February 10, 2012

Ohio Estate Tax in Peril – June 2, 2011

Trouble Brewing in Ohio – March 18, 2011

Analysis finds that cutting Ohio’s tax on capital gains would be costly, 92% of Ohioans would get nothing – March 14, 2011

Ohio Governor: Get Mojo Back by Slashing Taxes for Wealthy Investors – February 11, 2011

Two States Turning Their Back on Federal Stimulus Dollars; Another Stands Ready to Take the Money – November 19, 2010

 

Scott Walker

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“After his 2011 election, Wisconsin Gov. Scott Walker aggressively pursued and helped pass a series of tax cuts in 2011, 2013, 2014 and 2015. His policies pushed the state into bad fiscal straits and there is no evidence that tax changes enacted under his leadership have had the positive impact on the state’s economy that he promised. In addition, Gov. Walker has hinted that he favors repealing state and federal income taxes, a move that would make the tax system substantially more regressive.”

Scott Walker’s Tax-Cut-Driven Economic Plan – July 28, 2015

The Realities of Governing Will Put Candidates’ Anti-Tax Rhetoric to the Test – November 6, 2014

Tax Shifts Would Cut Taxes for Richest, Raise Taxes on Others – October 15, 2014

Tax Policy and the Race for the Governor’s Mansion: Wisconsin Edition – July 14, 2014

 


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Every Major Republican Candidate’s Tax Plan Would Lose Trillions in Revenue

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As the Republican presidential candidates meet once again to debate, now is a good time to take stock of their various plans for tax reform. Using the Institute on Taxation and Economic Policy’s microsimulation model, we have calculated the revenue impact of the six major candidates’ tax plans.

According to the graph below, every Republican candidate who has published a tax plan would either balloon the deficit by trillions or have to impose draconian cuts to programs to finance their massive tax cut plans. Even the so-called “moderate” tax plan from Jeb Bush would cost more than $7 trillion over the next ten years.

At the furthest end of the spectrum, Rand Paul and Ted Cruz’s plans are more than double the size of Jeb Bush’s plan at a cost of $14.8 trillion and $16.2 trillion over 10 years. Not too far behind are Marco Rubio’s $11.8 trillion plan, Donald Trump’s $12 trillion plan and Ben Carson’s $9.6 trillion plan.

Even without making needed additional public investments in infrastructure, research and healthcare, the Congressional Budget Office (CBO) projects that the nation is on course to add $7 trillion to the national debt over the next decade. This means the federal government must raise more revenue over the next 10 years just to prevent a massive rise in the nation’s indebtedness. Yet each of the Republican candidates’ proposals would double, triple, or even quadruple the fiscal hole over the next decade. At a time when lawmakers are struggling to find ways to pay for basic services such as highways, let’s please stop this tax cut crazy talk now.

Updated January 16 to reflect the release of Ben Carson’s more detailed flat tax plan.

Hillary Clinton’s Tax Proposal is Right on Inversions, Wrong on New Tax Cuts

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Earlier this week, Hillary Clinton outlined a new plan to combat the growth of inversions, a loophole through which U.S. companies pretend to be foreign in order to avoid taxes. Taken together, her plan to enact an exit tax, limit earnings stripping and to change the ownership threshold for becoming a foreign company would likely stop inversions in their tracks. Unfortunately, Clinton’s inversion plan also includes a fiscally imprudent proposal to use all of the added revenue from shutting down inversions to pay for new corporate tax breaks.

Clinton’s inversion proposals come in the midst of the growing outrage over Pfizer’s plan to pursue the largest inversion in history. Unless action is taken, Pfizer will use a merger with the company Allergan to shift its headquarters, on paper, to Ireland, which some say could allow it to avoid paying U.S. taxes on as much as $148 billion in earnings that it is holding offshore. To be clear, Pfizer will continue to be managed in the U.S. and will still benefit from government contracts and services. But inverting will allow the company to get out of paying its fair share of taxes.

While some in Congress are weirdly using inversions as an excuse to call for lower taxes on multinational corporations, Clinton’s proposals show that inversions can easily be stopped without broader tax reform or tax cuts. For example, Clinton has proposed to curb earnings stripping, a practice in which a U.S. subsidiary is loaded up with debt and makes large interest payments to its foreign parent company in order to lower its U.S. income taxes. By inverting, companies can more easily use earnings stripping to shift income earned in the U.S. into offshore low-tax jurisdictions. Clinton’s plan apparently follows President Obama’s approach in this area, by limiting the share of interest expense that can be deducted by the U.S. subsidiary. Obama’s proposal would raise about $50 billion over 10 years.

Clinton has also proposed to limit inversions by treating a company resulting from a merger of a U.S. and a foreign company to be recognized as having a foreign tax domicile only if the resulting company is majority owned by shareholders of the foreign rather than U.S. company. Under current regulations, only 20 percent of the new company has to be owned by the foreign shareholders. This allows U.S. companies to merge with substantially smaller foreign companies and move their tax domicile. This proposal would raise an estimated $17 billion in tax revenue over 10 years.

Clinton’s third and potentially most powerful proposal to curb inversions would impose an “exit tax” on companies that change their tax domicile to a foreign jurisdiction. The exit tax would require companies to pay the U.S. taxes they have “deferred” on their accumulated untaxed foreign income. Clinton does not specify what rate her exit tax would impose, but the ideal rate would be the full 35 percent rate (minus foreign tax credits) that companies would normally owe upon repatriation.

As noted above, combating inversions would not only make our tax system fairer, but it could also produce desperately needed revenue. The bitter fights over how to pay for even popular spending like sequester relief or the highway bill show that our country has a huge revenue problem, which is largely driven by the irresponsible decision to make permanent 85 percent of the Bush tax cuts, at a cost of $3.3 trillion over a decade.

Sadly, however, Clinton is not proposing to use any revenue generated by closing the inversion loophole to make new public investments (or reduce the deficit). Instead, she proposes to use all of the revenue gained from inversion reform to give new tax breaks to corporations! This does not make any sense considering that U.S. corporate taxes are already near historic lows. Like so many others, she seems to miss the point of why we need corporate tax reform.

Tax Justice Digest: To Read — Delaware — Big Alaska News — Star Wars

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Read the Tax Justice Digest for recent reports, posts, and analyses from Citizens for Tax Justice and the Institute on Taxation and Economic Policy.

Recommended Weekend Reading
Last week, we told you about the congressional debate over the tax extenders. This week the debate raged on without resolution, and Congress is expected to continue the debate through the weekend. ICYMI: CTJ has two recent extender related reports–Evaluating the Tax Extenders and Why Lawmakers Should Say No to Tax Extenders–that are easy and helpful reads.

The Joint Committee on Taxation this week released its Tax Expenditure Report (a report we adore) that allows anyone to understand how much federal deductions, exemptions and credits cost. ITEP’s Executive Director Matt Gardner fills us in on all the reasons we should spend at least part of our weekend reading this report. 

Donald Trump and That Broken Clock…
Earlier this week, Donald Trump criticized Amazon chief Jeff Bezos for allegedly using his purchase of the Washington Post as a tax dodge. Trump’s claim that Bezos is using the Post’s losses to reduce Amazon’s profit is clearly wrong since the newspaper is owned by Bezos, not Amazon. But here’s the part that Trump gets right: his criticism draws attention to the fact that Amazon pays a low effective corporate tax rate and has dodged $1 billion in taxes thanks to various loopholes. Check out our full commentary on Amazon’s tax avoidance strategies.

Delaware: A Homegrown Tax Haven
This week ITEP released its deep dive into all that is wrong with the way Delaware taxes corporations. Two fun tidbits from the report:

1)    Delaware actually had more companies incorporated than state residents in 2014.

2)    Setting up a company in Delaware requires less information than signing up for a library card.

There’s lots more to read about Delaware, including what states and Congress can do to improve tax fairness and transparency, in Delaware: An Onshore Tax Haven.

State News

Jaw-Dropping, Fireworks Worthy, Big News in Alaska
Alaska is the only state to ever repeal a personal income tax and has been without one for 35 years.  But this week, Gov. Bill Walker proposed a plan to remedy the state’s massive revenue shortfall by, among other things, instituting an income tax equal to 6 percent of the amount that Alaskans pay in federal income taxes. Read commentary from ITEP’s Carl Davis on this big news.

Connecticut Lawmakers Cave to Threats from General Electric Yet Again
This week, the governor and legislature once again put GE’s interests over the health and well-being of the state’s residents. ITEP’s State Tax Policy Director Meg Wiehe tells about the budget deal reached in Hartford this week.

Hope in Louisiana? 
ITEP’s Meg Wiehe is cautiously optimistic that tax reform in 2016 is possible in Louisiana thanks to a new governor and who he appointed as his commissioner of administration. Read about this New Hope here (sneaky Star Wars reference, you’re welcome).

Shareable Tax Analysis:

Delaware and tax 

ICYMI: ‘Tis the season for crossing things off lists. Giving back to your favorite tax policy think tanks is something that you may not have crossed off that list yet, but never fear! The link for giving is here!

Questions, holiday greetings?  Email Kelly Davis at: kelly@itep.org

Congress’ Christmas Present to the American Public: A Longer Tax Expenditure Report

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Earlier this week, the Joint Committee on Taxation (JCT) released its annual Tax Expenditure Report, a compendium of the many tax giveaways that drain federal revenues. In theory, this report is an essential cheat sheet for policymakers seeking to identify the best ways of closing unwarranted tax loopholes and making our tax system fairer and more sustainable.

In practice, Congress has made little progress in cleaning out the tax code in the four decades since the JCT began publishing this report. But the report remains a valuable yardstick for quantifying the cost of various tax breaks.

Here are a few takeaways from the newest report:

1)      It’s getting longer. This year’s report lists over 200 discrete tax breaks. In 1994, the JCT tabulated only 127 giveaways.

2)      Congress is poised to make it longer still. This year’s edition of the report is notably lightened by the temporary absence of the dozens of tax “extenders” that expired at the end of 2014, many of which will likely be resurrected by Congress before year’s end.

3)      Not all tax expenditures are created equal. Just a handful of the tax breaks listed in the JCT report account for a huge share of the $6.8 trillion in tax expenditures tallied here—and some of these largest giveaways have a truly pernicious effect on tax fairness.  To cite two:

The special lower tax rate on capital gains and dividends puts a $690 billion dent in five-year tax collections—while offering little or no benefit to millions of middle- and lower-income working families who get by on the wages they earn each year. It would be hard to devise a way of blowing $700 billion that offers less to working families.

The ability of multinational corporations to indefinitely defer tax on the income of their foreign subsidiaries will cost $563 billion over the next five years—and, as important, gives companies like Apple and Pfizer an incentive to pretend they’re keeping billions of dollars in cash in offshore tax havens. Ending deferral would shore up corporate tax revenues while largely ending the tax-avoidance games played by large multinationals.

In a more perfect world, Congress would annually ask tough questions about whether these and other upside-down tax subsidies such as the mortgage interest deduction are a sensible way of spending the public’s money. After all, if lawmakers proposed a $75 billion direct spending program for housing subsidies that reserved $30 billion for those earning over $200,000 a year, they’d be laughed out of town. But that’s what Congress does, indirectly, each year by leaving the mortgage interest deduction intact.

The timing of the JCT’s latest report is especially apt because Congress has spent much of the last week devising a plan that would dramatically expand the list (and the cost) of corporate tax expenditures. If lawmakers extend, or even make permanent, the dozens of mostly-business-oriented tax giveaways that expired at the end of 2014, next year’s tax expenditure report will be a lot longer—and the report’s tally of “perfectly legal” tax avoidance schemes will be a lot more expensive. It would be hard to find a clearer litmus test of whether Congressional tax writers take seriously the goal of paring back tax expenditures than the impending choice they face on the extenders. 

Connecticut Lawmakers Cave to Threats from General Electric Yet Again

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Connecticut lawmakers earlier this year passed a budget with more than $1 billion in new revenue, including increased corporate taxes, to plug a budget gap and ensure the state has resources to make needed investments in education, transportation and health care.  In late June, Gov. Dannel Mallow called lawmakers back to the capital for a special session, essentially caving to notorious tax dodger General Electric (GE) and other corporations’ demand that the state pare back just enacted tax chages. The most significant change enacted in the special session was a delay in the start date for combined reporting. Combined reporting requires a multi-state corporation to add together the profits of all of its subsidiaries, regardless of their location, into one report for tax purposes. Connecticut Voices for Children puts it this way:

 “Combined reporting is an essential policy aimed at preventing corporations from using accounting gimmicks to shift profits actually earned within their borders to states and foreign countries where they will be taxed at lower rates or not at all.”

This week, the governor and legislature once again put GE’s interests over the health and well-being of the state’s residents.  Due to underperforming personal income tax collections, the state faces a projected $350 million budget shortfall for the current fiscal year and another $552 million in the next fiscal year.  To close the current year gap, the legislature voted this week to cut early-childhood programs, conservation efforts, and medical services for inmates. But, it also agreed to spend money to cut corporate taxes including modifying combined reporting requirements and changing how some corporate deductions can be claimed.

The new corporate tax changes are largely seen as an effort to keep GE headquartered in the state.  But not surprisingly GE hasn’t committed to staying put and news leaked this week they may be considering a move to Boston. Since Massachusetts also requires multinational corporations to file combined returns, this latest news would suggest that Connecticut is being played by GE executives.  

Hope in Louisiana?

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Louisiana Governor-elect John Bel Edwards may be a breath of fresh air for tax justice advocatesin Louisiana this upcoming legislative session.

Gov. Bobby Jindal prioritized policies aligned with his no new taxes pledge rather than meeting the needs of Louisianans. The outgoing governor even introduced a losing proposal that would have eliminated the state’s income tax and replaced the revenue with a broader sales tax.

But hope springs eternal for fundamental and thoughtful tax reform as way to help close the state’s projected budget gap of $370 million for the current fiscal year and a more than $1 billion budget gap for next year. The optimism for revenue raising tax reform is possible thanks to the Gov. Elect’s appointment of former Republican Lt. Gov. Jay Dardenne as the state’s commissioner of administration  (a position that is equivalent to chief budget officer). Dardenne was the architect of revenue-raising tax reform enacted but later repealed) in the early 2000s. That package lowered sales taxes and increased the state’s reliance on income taxes.  

Another bright spot–last week the governor-elect called for doubling the state EITC as part of his commitment to reduce poverty in the Pelican State. We’ll be closely following the tax debate in Louisiana in the new year.

Back to Reality: Alaska Governor Proposes Progressive Income Tax

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For years, lawmakers interested in cutting or eliminating personal income taxes have held up Alaska as aAlaska Progressive Income Tax model for what they would like to achieve.  Alaska is the only state to ever repeal a personal income tax and has been without one for 35 years.  But Alaska’s status as an anti-tax role model may not last.  Yesterday, Gov. Bill Walker proposed a plan to remedy the state’s massive revenue shortfall by, among other things, instituting an income tax equal to 6 percent of the amount that Alaskans pay in federal income taxes.

As background, Alaska’s decision to repeal its income tax always came with something of an asterisk attached.  The state’s 1980 repeal only occurred after drillers discovered North America’s largest oil field on land that happened to be owned by the state government.  During times of high oil prices, the billions of dollars in tax revenue collected from the energy sector were enough to fund 90 percent of the state’s general operations and to pay an annual dividend to Alaska residents (totaling $2,072 per person this year).

But as anybody who has driven by a gas station this year knows, these are not times of high oil prices.  Crude oil prices recently fell to just $37 per barrel and Alaska’s oil-dependent revenue streams are now raising enough to fund just 40 percent of the state’s budget, even with significant spending cuts enacted last year.  As Gov. Walker explains, “we cannot continue with business as usual and live solely off of our natural resource revenues.”

The Governor proposed revenue changes that include raising the state’s comically outdated motor fuel tax rate, boosting taxes on alcohol and tobacco, reforming the tax treatment of oil and gas producers, and paring back residents’ annual dividend.  Of course, many of these changes would impact lower- and moderate-income Alaskans more heavily, which is part of the reason why (PDF) the package also includes an income tax piggybacked on the progressive federal income tax system.  Notably, Gov. Walker’s income tax design is similar to one proposed by lawmakers from both parties during this year’s legislative session, and also resembles the structures previously in place in states such as North Dakota, Rhode Island, and Vermont.

Ultimately, the plan put forth by Gov. Walker appears to be a serious attempt to address the state’s yawning, $3.5 billion deficit.  And as Alaska Public Media explains, it would also “shift the state away from a direct reliance on oil revenue and the boom-and-bust cycle of oil prices.”

Now that the Governor has spoken out about an income tax, wild, erroneous claims about the economy-destroying nature of personal income taxes are surely on the way.  But the reality is that if Alaska can’t count on oil revenues to fund its schools and infrastructure, an income tax is the most equitable and sustainable option available. 

What Makes Delaware an Onshore Tax Haven

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When you think of a tax haven, you probably imagine the far off tropical islands of Bermuda or Grand Cayman, but the reality is that there is a major tax haven even closer to home in the state of Delaware. A new report from the Institute on Taxation and Economic Policy (ITEP) explains how one of our nation’s smallest states is one of the world’s biggest havens for tax avoidance and evasion.

What makes Delaware a tax haven? First, Delaware is one of the easiest places in the world to set up an anonymous shell corporation. In fact, setting up a company in Delaware requires less information than signing up for some library cards. This means that it is difficult for law enforcement to trace the activities of the anonymous shell corporations to the people who actually own and control them. This is what makes Delaware corporations an ideal vehicle not only tax evasion, but also for illicit activities like drug trafficking, terrorism finance and defrauding the government.

In addition, the state does not require companies to pay any tax on income relating to intangible assets held by companies based in the state. Companies take advantage of accounting gimmicks to shift their intangible income from other states into Delaware in order to take advantage of the zero tax rate on income earned from intangible assets. For example, Toys R Us has avoided millions in taxes by transferring its trademarks and trade names (including “Geoffrey the Giraffe”) into Delaware and charging its subsidiaries in other states for use of its trademarks.

Taken together, these two features help explain why there are 1.1 million companies registered in a state that has a population of only 935,000 people. While many in the media have highlighted the 19,000 companies listing the Ugland House in the Cayman Islands as their address, this pales in comparison to the 285,000 companies that are listed at the modest CT Corporation building in Wilmington, Delaware.

Barring action from the Delaware legislature , the good news is that individual states and the federal government can easily close down this onshore tax haven. To stop anonymous shell corporations, Congress could pass legislation, such as the Incorporation Transparency and Law Enforcement Act, mandating that states require the name and address of each owner of a company at the time of incorporation and after any change in ownership. This would lift the veil on individuals seeking to hide behind their anonymous shell corporations. And states can adopt “combined reporting,” which requires companies to report the income and expenses of all out-of-state subsidiaries for the purpose of determining corporate income tax.

Ending Delaware’s tax haven status would send a clear signal to other nations that the U.S. is a credible actor and thus bolster our efforts to combat offshore tax avoidance and evasion internationally. In addition, by putting an end to anonymous shell corporations, the United States could play a leadership role in promoting this critical policy throughout the rest of the world.

Read ITEP’s full report “Delaware: An Onshore Tax Haven”