Federal Tax

Unlike the individual tax code, it’s often easy to view the business tax code impersonally. Who are the workers, consumers, and shareholders who interact with businesses in the U.S.? What forms do these businesses take? How do business taxes impact people’s lives? It is essential we answer these questions in order to design a business
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The debate in Washington, D.C. often centers around tax expenditures, so-called corporate loopholes, in the tax code. But not all tax expenditures are created equal. Some represent neutral tax treatment and should be left alone, while others are distortionary and should be repealed. Understanding what a tax expenditure represents is essential for understanding how our tax
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The Joint Committee on Taxation (JCT) recently released a report entitled “Overview of the Tax Gap.” The tax gap is the difference between taxes paid and taxes owed, and this gap can exist for a few reasons. Taxpayers may report less than their full tax liability on their return (underreporting), pay less taxes than owed
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Pass-through businesses—businesses like sole proprietorships, S corporations, and partnerships that “pass” their income “through” to their owner’s income tax returns and pay the ordinary individual income tax—make up a majority of U.S. businesses. Marginal tax rates vary for pass-throughs depending upon the state in which they operate because of differences in how states tax individual
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Pass-through businesses are the dominant business structure in America. Pass throughs file more tax returns and report more business income than C corporations. Pass-through businesses are not subject to the corporate income tax, but instead report their income on the individual income tax returns of owners. This blog will address some frequently asked questions about
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The introduction of Senator Elizabeth Warren’s (D-MA) “Real Corporate Profits Tax” has put a spotlight on the differences between book income, or the amount of income reported by corporations on their financial statements, and the tax code’s definition of income upon which the corporate income tax is assessed. Senator Warren, among others, argues that firms
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One of the most significant provisions in the Tax Cuts and Jobs Act (TCJA) was the reduction of the U.S. corporate income tax rate from 35 percent to 21 percent. Lowering the corporate rate was a pro-growth policy, and its importance is especially apparent from an international perspective. Previously, America’s combined statutory corporate income tax
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In the U.S. economy, there are tens of millions of businesses, including more than 30 million pass-through businesses and more than a million C corporations. These firms are spread throughout a variety of industries, providing services and producing goods. Understanding how much firms produce and how many workers firms employ within each industry can help
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A new working paper from the International Monetary Fund (IMF) by economists Serhan Cevik and Fedor Miryugin shows that taxes have an economically important effect on whether firms survive in the marketplace. Amid concern by policymakers and scholars over the fall in business dynamism in the United States, the authors examine whether taxation influences how
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A recent report on tax revenue sources shows the extent to which the United States and other OECD countries rely on different taxes for government revenues. Policy and economic differences among OECD countries have created differences in how they raise tax revenue, with the United States deviating quite substantially from the OECD average. In the
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Understanding business employment and taxes is essential to crafting informed tax policies that affect businesses, their employees, and their customers. In light of policies aimed at influencing the decisions of specific companies—for example, Sen. Bernie Sanders’ (I-VT) “Stop BEZOS Act” and “Stop Walmart Act,” both proposed last year—it is especially valuable for policymakers to know
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Businesses in America broadly fall into two categories: C corporations, which pay the corporate income tax, and pass throughs—such as partnerships, S corporations, LLCs, and sole proprietorships—which “pass” their income “through” to their owner’s income tax returns and pay the ordinary individual income tax. Understanding the composition and characteristics of American businesses provides important context
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A new report from the Organisation for Economic Co-operation and Development (OECD) shows that the U.S. tax wedge—the difference between total labor costs to the employer and the corresponding net take-home pay of the employee—declined from 2017 to 2018. That outcome, as detailed in Taxing Wages 2019, is primarily because of the individual income tax
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