Tax Policy

Tax Policy

Research

Jeremy Horpedahl | Jan 14, 2016
Taxpayers who make contributions to approved charitable organizations can deduct those contributions from their income before computing their tax liability. In fiscal year 2014, the deduction lowered taxes by $47 billion, with over 93 percent of the benefits going to tax filers under the individual income tax rather than the corporate tax. Most taxpayers would benefit from removing the deduction and lowering tax rates since most taxpayers do not use the deduction regularly. The only economic justification for the deduction would be to encourage donations to organizations that provide public goods or quasi-public goods. It is unclear, however, that the charitable deduction actually encourages private sector provision of these goods.
Jason J. Fichtner, Adam Michel | Dec 07, 2015
In an increasingly global economy, national governments are searching for ways to keep corporations from moving highly valuable intellectual property and associated economic activity to lower tax jurisdictions. In particular, governments are concerned with losing jobs, investment that fosters innovation, and the tax base attributable to income arising from intellectual property. One proposed solution is a patent box, also called an innovation box. A patent box lowers the rate of corporate income taxes paid on income originating from targeted intellectual property.
Jason J. Fichtner, Courtney Michaluk, Adam Michel | Dec 03, 2015
Over $2 trillion of US corporate profits have been systematically locked out of the US economy by an outdated tax system. One major symptom of the poorly designed worldwide corporate tax rules in the US is the rise of corporate inversions, where a domestic firm merges with a foreign firm and moves the new corporation’s headquarters abroad.
Jason J. Fichtner, Adam Michel | Jul 14, 2015
A new study published by the Mercatus Center at George Mason University surveys the current economic literature on research and development tax incentives. The study investigates design and implementation problems the R&D credit faces, including legal ambiguities, policy uncertainty, insufficient definitions of “research,” and special-interest lobbying.
Whitney Afonso | Jun 24, 2015
While the federal government has taken the lead in implementing efforts toward greater transparency—for example, by creating the easy-to-access website Recovery.gov to enable visitors to track the spending of stimulus money —state and local governments are following suit by providing more online information about how they spend taxes. Proponents of increased transparency in the public sector, including elected officials and citizens, believe that transparency is an important tool for holding governments accountable and reducing corruption. In a period when trust in government has hit a record low (24 percent in 2014 and a record low of 19 percent in 2013), increased transparency is viewed as a way of promoting trust and cooperation between government and its citizens.
Jeremy Horpedahl | May 08, 2015
The CTC provides a significant subsidy to almost all tax- paying families with children, and the US federal and local tax codes contain many other provisions that subsidize child rearing. In the aggregate, the CTC subsidy to families with children has grown to nearly $60 billion, placing it among the list of the largest “tax expenditures” as defined by Congress’s Joint Committee on Taxation.

Testimony & Comments

Research Summaries & Toolkits

| Sep 24, 2013
The Mercatus State Policy Guide is intended to summarize and condense the best research available on the most relevant topics. It’s a starting point for discussion, not a comprehensive overview of economic policy. Each statement is supported by academic research, with links provided in the endnotes. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your economic policy research.
| Jul 23, 2013
The Mercatus Policy Guide is intended to summarize and condense the best research available on the most pressing topics. It serves as a starting point for discussion, not a comprehensive overview of economic policy. Anyone who wants to go deeper into these studies should consult the references listed at the back. Mercatus scholars are available to further explain the results of their studies. We hope the guide will prove to be a valuable tool in your evaluation of economic policy.
Veronique de Rugy, Jason J. Fichtner, Charles Blahous, Matthew Mitchell | Mar 15, 2013
Despite years without a federal budget, trillion-dollar deficits, and ad hoc, crisis-driven fiscal and economic policies that failed to deal with the looming entitlement crisis, leaders on both sides in Washington are now touting seemingly miraculous progress toward a “fix” to our budgetary woes.
Jason J. Fichtner, Veronique de Rugy | Jan 25, 2013
The debt ceiling, or the legal limit the federal government may borrow, is set currently at $16.4 trillion.[1] In his latest report, Secretary of the Treasury Timothy Geithner predicts that the United States will need to increase the debt ceiling sometime between February 15, 2013, and early March 2013.[2] The Congressional Research Service estimates the federal government will have to issue an additional $700 billion in debt above the current statutory limit to finance obligations for the remainder of FY2013…
| Feb 13, 2012
This policy brief takes a look at the president's FY2013 budget proposal and emphasizes the need for fundamental reform in the areas of spending, taxes, and the budget process.
| Nov 2011
A new working paper, “Why the United States Needs to Restructure the Corporate Income Tax,” by Mercatus Center at George Mason University senior scholar Jason Fichtner suggests successful reform of the U.S. corporate tax code must address its fundamental problems: 1) the uncompetitive corporate income tax rate; and 2) the outdated “worldwide” system for corporate tax collection.

Expert Commentary

Jan 20, 2016

It's been almost 30 years since the last major federal tax system overhaul, and the chances of real reform in the next year look grim. But as usual, there's some hope in the states, and reformers may want to direct their efforts there.
Jan 19, 2016

The Treasury Department is once again doubling down on the bad bet that more regulation will stop U.S. firms from moving abroad. Treasury's Nov. 19 anti-inversion notice repeats the same mistakes from years past and doesn't address the underlying incentives which discourage businesses from headquartering in the United States.
Jan 11, 2016

I put more faith in Zuckerberg’s ability to achieve his charitable goals with his own money than I do in Washington’s ability to do it for him. And, as it stands, individuals remain free to spend their wealth however they please. Zuckerberg built his fortune by creating value for society in ways the rest of us never thought to. Why not trust him to spend that fortune in the same fashion?
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Dec 29, 2015

The omnibus spending bill recently passed by Congress and signed into law by President Obama delays the onset of the Affordable Care Act (ACA)’s so-called “Cadillac plan tax” for two years. The new law also weakens the effect of the tax (assuming it’s ever collected) by making it deductible, as noted by my Mercatus Center colleague Brian Blase. I agree with former OMB director Peter Orszag’s observation that the delay may simply be a first instance of a “rolling permanent deferral” of the Cadillac plan tax.
Dec 15, 2015

Tax reform is a hot topic in Washington, D.C. But luckily, policymakers need not fly blind when it comes to defining the principles key to a successful revenue system. The most basic goal of tax policy is to raise enough revenue to meet the government's spending requirements in the way that has the least impact on the economy. Academic research suggests that, to meet this goal, a successful system should be simple, equitable, permanent, and predictable.
Nov 09, 2015

International tax regulators have been busy devising ways to increase taxes on international businesses. Recently, the Organization for Economic Cooperation and Development released its long awaited proposal to curb international tax avoidance, but the United States should first worry about its own domestic corporate tax code. The OECD proposal aims to centralize global tax rules and increase effective tax rates on international firms. U.S. technology firms such as Google, Facebook, Amazon and Apple will likely be harmed the most.

Charts

Pfizer Inc. recently became the largest US firm to move to a lower-tax jurisdiction by combining with a foreign competitor. In this so-called “inversion,” Pfizer will merge with Allergan PLC, and the new headquarters will be located in Ireland. Inversions are a symptom the United States’ broken, outdated, and uncompetitive corporate tax system. The United States has the single highest corporate tax rate in the developed world—the US combined corporate tax rate is 39.1 percent. The chart below shows that US peer nations have systematically lowered their high corporate tax rates, while the United States’ rate has remained unchanged.

Experts

Antony Davies is associate professor of economics at Duquesne University, Mercatus Affiliated Senior Scholar, and Strata Research Fellow. Davies has authored over 150 op-eds for, among others, the Wall Street Journal, Los Angeles Times, Washington Post, Forbes, Investors Business Daily, and New York Daily News.
Veronique de Rugy is a senior research fellow at the Mercatus Center at George Mason University and a nationally syndicated columnist. Her primary research interests include the U.S. economy, the federal budget, homeland security, taxation, tax competition, and financial privacy. Her popular weekly charts, published by the Mercatus Center, address economic issues ranging from lessons on creating sustainable economic growth to the implications of government tax and fiscal policies. She has testified numerous times in front of Congress on the effects of fiscal stimulus, debt and deficits, and regulation on the economy.
Jason J. Fichtner is a senior research fellow at the Mercatus Center at George Mason University. His research focuses on Social Security, federal tax policy, federal budget policy, retirement security, and policy proposals to increase saving and investment.
Matthew Mitchell is a senior research fellow at the Mercatus Center at George Mason University, where he is the director of the Project for the Study of American Capitalism. He is also an adjunct professor of economics at Mason. In his writing and research, he specializes in economic freedom and economic growth, public-choice economics, and the economics of government favoritism toward particular businesses.
Eileen Norcross is a senior research fellow at the Mercatus Center at George Mason University. As director for the Mercatus Center’s State and Local Policy Project, she focuses on questions of public finance and how economic institutions support or hamper economic resiliency and civil society. She specializes in fiscal federalism and institutions, state and local governments and finance, pensions, public administration, and economic development.

Podcasts

Veronique de Rugy | September 29, 2015
Tax code reform is often discussed during presidential races but is rarely implemented. Veronique de Rugy discusses why on Marketplace on American Public Media.

Recent Events

Please join us for lunch with Mercatus Center Senior Research Fellow Jason Fichtner to discuss pro-growth policy options. He’ll also address the research and ideas Mercatus shares with policymakers in order to advance the debate on economic issues.

Books

Jason J. Fichtner | Aug 27, 2012
This book shows not only what is wrong with the current federal spending plan, but ways to fix it. Business professionals and anyone interested in the government’s response the recession will find this an important book. Mercatus senior research fellow Jason Fichtner authored Chapter 5: “Three Approaches to Fostering Economic Competitiveness.”…

Media Clippings

Jason J. Fichtner | Jul 24, 2014
This excerpt originally appeared in FOX Business.
Jason J. Fichtner | Jul 17, 2014
This excerpt originally appeared in FOX Business.
Eileen Norcross | Aug 26, 2013
Eileen Norcross cited at Variety.
Jason Sorens, William Ruger | Aug 22, 2013
Freedom in the 50 States Project mentioned at Investor's Business Daily…
Vincent H. Smith | Jul 17, 2013
Farming, it turns out, is not so risky after all. Smith reports that the annual failure rate for farms is only 0.5 percent, compared to 7 percent for other businesses.
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