In the Tax Justice Digest we recap the latest reports, blog posts, and analyses from Citizens for Tax Justice and the Institute on Taxation and Economic Policy. Here’s a rundown of what we’ve been working on lately.
Every year around Tax Day, ITEP updates some of its key reports to help put the nation’s tax system in proper context. This year, as people around the country march to demand President Trump release his tax returns and as policymakers consider overhauling our federal tax system, these reports are especially topical. Read 10 Things You Should Know on Tax Day.
Who Pays Taxes in America Now—Who Will Pay under Possible Tax Reform?
The nation’s combined federal, state and local tax system is slightly progressive and relatively proportional (for now), meaning each income quintile’s total share of taxes is more or less on par with its total share of income.
But ITEP analysts also examined what the tax system would look like if Speaker Paul Ryan’s so-called Better Way plan were enacted. It found that Ryan’s plan would cut taxes for every group, but would reserve the most lavish tax cuts for the top 1 percent. In fact, under Ryan’s plan the tax system would redistribute income away from the bottom 99 percent and toward the top 1 percent. Read Who Pays Taxes in America in 2017 for a complete overview.
What about State Tax Systems?
The reason the nation’s combined federal, state and local tax system is relatively proportional is because the federal income tax is progressive. Every state and local tax system, however, is regressive, meaning lower-income people pay a higher effective state and local tax rate than the wealthy. Take a look at Fairness Matters: A Chart Book on State and Local Taxes, for an overview of tax systems in all 50 states.
The U.S. is Far Below Average When It Comes to Taxes We Pay Relative to GDP
Tax Day—when many taxpayers who waited until the last minute to file are writing checks to Uncle Sam and also their state governments—perhaps isn’t the best time to present these harsh facts, but compared to other advanced economies:
- The United States is one of the least taxed developed countries. ‘
And while corporations argue that the U.S. tax system is too onerous and stifles competitiveness (in spite of the fact that profitable corporations are doing quite well), the truth is:
- The United States collects a substantially smaller share of total corporate taxes than average among 34 developed countries.
15 Reasons We Need Corporate Tax Reform—And We Don’t Mean Tax Cuts
Another new ITEP report examined 2016 financial filings to identify profitable companies that paid ZERO in federal taxes. The report highlights 15 U.S. corporations, including some common household names such as GE and Netflix, and identifies the tax breaks they used to zero out their tax obligations. For most of them, last year’s zero-tax liability wasn’t an aberration.
Fortune 500 Companies Hold a Record $2.6 Trillion Offshore
A March 2017 ITEP corporate report, Fortune 500 Companies Hold a Record $2.6 Trillion Offshore, examines how much cash corporations are stashing offshore and, based on analyses of their financial reports, estimates how much they’re dodging in taxes ($780 billion).
The 35 Percent Corporate Tax Myth
Our wide-ranging, eight-year study of Fortune 500 companies found that the average effective tax rate for profitable corporations is 21.4 percent, barely more than half the statutory rate. Further, a broad swath of profitable companies paid ZERO federal taxes in at least one of the last eight years. Check out the corporate study for more details on how corporations avoid taxes.
Undocumented Immigrants Pay State and Local Taxes
In early March, ITEP updated its distributional analysis of Undocumented Immigrants’ State and Local Tax Contributions. According the report, undocumented immigrants contribute an estimated $11.74 billion in state and local taxes each year. This means that undocumented immigrants contribute 8 percent of their incomes in state and local taxes on average, which is on par with the rate paid by middle-income taxpayers. Read the full report
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