Garrett Watson

Tax Reform’s Broader Corporate Tax Base Opens More to Biden’s Proposed Rate Hike

Details and Analysis of President Biden’s FY 2022 Budget Proposals

Explore President Biden budget proposals, including tax and spending in American Jobs Plan and American Families Plan. See Biden tax and spending proposals.

Broad-Based Taxes on Consumption and User Fees Are Efficient Ways to Raise Federal Revenue for Infrastructure

Rather than relying on damaging corporate tax hikes, policymakers should consider user fees and consumption taxes as options for financing new infrastructure to ensure that a compromise does not end up being a net negative for the U.S. economy.

Taxing Consumption Progressively Is a Better Way to Tax the Wealthy

Policymakers concerned about the current tax treatment of unrealized capital gains would be better off exploring policy solutions like consumption taxes rather than tried-and-failed strategies.

Repealing Tariffs Would Be a Simple Option to Boost U.S. Economic Growth

Of the many tax policies modeled in our new Options for Reforming America’s Tax Code 2.0, repealing the tariffs imposed under President Trump’s administration would be one of the simplest ways policymakers could boost economic growth.

Joint Committee on Taxation Data Shows Federal Tax System Is Progressive

New Joint Committee on Taxation (JCT) data indicates that the federal tax system is progressive, consistent with similar analysis by the Congressional Budget Office (CBO), and the OECD.

Financing Infrastructure Spending with Corporate Tax Increases Would Stunt Economic Growth

The Biden administration’s American Jobs Plan proposal to fund infrastructure spending relies on a bet that the benefits outweigh the costs of a higher corporate tax burden. Using the Tax Foundation model, we find that this trade-off is a bad one for the U.S. economy, resulting in reduced GDP, less capital investment, fewer jobs, and lower wages.

Taxing Unrealized Capital Gains at Death Is Unlikely to Raise Revenue Advertised

As part of the tax proposals in President Biden’s American Families Plan, unrealized capital gains over $1 million would be taxed at death. However, this policy would likely raise less revenue than advocates expect after considering the proposal’s impact on taxpayer behavior, including capital gains realizations, and historical capital gains and estate tax revenue collections.

Details and Analysis of Tax Proposals in President Biden’s American Families Plan

The Biden administration’s proposed American Families Plan includes several major tax changes. Explore the tax proposals in the American Families Plan.

25 Percent Corporate Income Tax Rate Would Make U.S. Above Average Compared to Peers

Some lawmakers have expressed concerns about President Biden’s proposal to raise the federal corporate income tax rate from 21 percent to 28 percent, and instead suggest raising the rate to 25 percent.

Relaxing State and Local Tax Deduction Cap Would Make Tax Code Less Progressive

As President Biden’s tax plans are considered in Congress, the future of the $10,000 cap for state and local tax deductions (SALT) is becoming an important part of the tax debate.

Providing Full Cost Recovery for Investment and Lowering Taxes on Firms Are Best Options for Boosting Growth

As policymakers consider tax options to boost the U.S. economy’s long-run economic growth, they should consider reforms that would increase growth the most while minimizing forgone tax revenue.

Biden’s Proposed Capital Gains Tax Rate Would be Highest for Many in a Century

The Biden administration is proposing to tax long-term capital gains at ordinary income rates for high earners, which will bring the top federal rate to highs not seen since the 1920s.

Top Combined Capital Gains Tax Rates Would Average 48 Percent Under Biden’s Tax Plan

The top federal rate on capital gains would be 43.4 percent under Biden’s tax plan (when including the net investment income tax). Rates would be even higher in many U.S. states due to state and local capital gains taxes, leading to a combined average rate of over 48 percent compared to about 29 percent under current law.

Modernizing Rental Car and Peer-to-Peer Car Sharing Taxes for a Post-Pandemic Future

The economic evidence shows that travelers and tourists are sensitive to price changes for rental cars and adjust their behavior to avoid the tax, harming state economies and the travel sector right as the industry is trying to recover from the effects of the coronavirus pandemic.

Imposing New Taxes on Peer-to-Peer Car Sharing Will Not Help Texas Economic Recovery

Imposing the rental car excise tax on peer-to-peer car sharing would be a move in the wrong direction by expanding a costly and distortive tax for visitors whose business will help Texans recover post-pandemic.

Reviewing the Federal Tax Treatment of Research & Development Expenses

Simplifying the R&D credit, making it more accessible for smaller firms, and ensuring full cost recovery for R&D expenses by canceling the upcoming R&D amortization are three things policymakers should consider when trying to improve the tax code for R&D.

Biden’s Corporate Minimum Book Tax Narrows, but Problems and Uncertainties Remain

The corporate tax base should be reformed directly, rather than piecemeal through a complicated and burdensome separate tax applicable to a small number of companies.

U.S. Effective Corporate Tax Rate Is Right in Line With Its OECD Peers

Whether we use corporate tax collections as a portion of GDP, average effective tax rates, or marginal tax rates, each measure shows that the U.S. effective corporate tax burden is close to or above the average compared to its OECD peers. Raising corporate income taxes would put the U.S. at a competitive disadvantage, whether one looks at statutory tax rates or effective corporate tax rates.

Combined Corporate Rates Would Exceed 30 Percent in Most States Under Biden’s Tax Plan

While the focus has been on the federal rate, it is important to include state tax rates when thinking about the total tax burden on corporate income.