Tax Policy

Tax Policy

Research

Jason J. Fichtner, Adam Michel | Mar 17, 2016
The system for international corporate income taxation is at risk of losing its most valuable feature—diversity and competition. The Base Erosion and Profit Shifting Project of the Organisation for Economic Co-operation and Development attempts to change the international tax system by transferring control of corporate taxation from individual nations to an international body. This shift favors consolidated and uniform tax rules but sacrifices compliance efficiency, taxpayer rights, and nations’ ability to set the tax policies best suited to their populations.
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Over $2 trillion of US corporate profits have been systematically locked out of the US economy by an outdated tax system.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.

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

Aug 18, 2016

You would think that Clinton would be more favorable to helping low-income Americans and union workers in particular. If she were, the way to go would be to reform the corporate income tax, not to arbitrarily prohibit companies from moving to where tax laws are less punitive.
Aug 09, 2016

But sales tax holidays are not a loss for everyone. Favored retailers and manufacturers win, while others lose. It all depends on what makes it on the list of tax-free items. As a result, tax-free holidays have more to do with who has the best lobbyists than what kids actually need for school.
May 26, 2016

For years, organizations like the World Bank and the OECD have bullied low-tax nations into changing their tax privacy laws so uncompetitive nations can track taxpayers and companies around the world.
Apr 21, 2016

Americans just finished filing and paying for their federal income taxes. It was painful and expensive. Collectively, we still have several more days to go before we are done paying for our entire tax bill.
Apr 18, 2016

The tax code today is a 76,000-page monstrosity, and the current top marginal rate of 39.6 percent will hit all married filers with taxable income of $466,950 and higher.
Mar 24, 2016

Not everyone would like to reduce taxes on corporations, but everyone should. The data show that most of the corporate tax burden is actually shifted to workers, who end up shouldering the tax in the form of lower wages.

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 a Senior Affiliated Scholar at the Mercatus Center at George Mason University, associate professor of economics at Duquesne University, and Strata Research Fellow.
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 and director for the State and Local Policy Project at the Mercatus Center at George Mason University.

Podcasts

William Beach | August 16, 2016
William Beach talks to host Steve Cochran about the problems with the presidential candidates’ tax plans.

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, Jacob Feldman | Dec 08, 2015
History has shown that tax reforms seldom last when special interests have substantial incentives to lobby Congress for tax breaks. Making the tax code as simple—by taxing a broad base at the same low rate—and as transparent as possible will help reduce the ability and incentives to reverse future tax reforms.

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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