Tax Policy in the 21st Century (PowerPoint) (pdf) · Tax PliPolicy in the 21st Century Presented to...
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T P li i h 21 st C T ax P olicy inthe 21 st Century Presented to Wisconsin Family Impact Seminar William F. Fox, Director The University of Tennessee January 26, 2011
Transcript of Tax Policy in the 21st Century (PowerPoint) (pdf) · Tax PliPolicy in the 21st Century Presented to...
T P li i h 21st CTax Policy in the 21st CenturyPresented to
Wisconsin Family Impact Seminar
William F. Fox, DirectorThe University of Tennessee
January 26, 2011
Characteristics of a good tax systemCharacteristics of a good tax system
• Provides sufficient revenueProvides sufficient revenue– Current revenuesLong term growth– Long term growth
– Stability
January 2011 2
Characteristics of a good tax systemCharacteristics of a good tax system
• FairnessFairness– Incidence must be considered since fairness should be addressed in terms of who actuallyshould be addressed in terms of who actually bears the tax burden
– Vertical equityVertical equity– Horizontal equity– Equity for the systemEquity for the system
January 2011 3
Characteristics of a good tax systemCharacteristics of a good tax system
• Low administration and compliance costsLow administration and compliance costs– AdministrationCompliance– Compliance
– Evasion and avoidance
January 2011 4
Characteristics of a good tax systemCharacteristics of a good tax system
• Limited economic effectsLimited economic effects– Work effortConsumption decisions– Consumption decisions
– Property transfersP t i t– Property improvements
– SavingsB i d h h ld l i– Business and household locations
January 2011 5
Distribution of Wisconsin State Tax Revenues, 2009
Corporate income tax 5%
Other taxes 2%5% 2%
General sales 28%
I di id l i
Selective sales 18%
Individual income tax 41%
18%
License taxes 6%
January 2011 6
Wisconsin Total State Tax Revenue Growth Rates, 1994‐2009
12.0%
6 0%
8.0%
10.0%
r
2.0%
4.0%
6.0%
year over y
ea
‐4 0%
‐2.0%
0.0%
Growth, y
‐8.0%
‐6.0%
4.0%
1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 20091994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
January 2011 7
Change in Total Taxes, l bJuly‐September, 2009 to 2010
U.S. = 3.9%
Greater than 7.0%4.0% to 7.0%Less than 4.0% ND
January 2011 8
‐‐14‐‐‐‐17‐‐‐‐17‐‐ ‐‐2‐‐
Tax Reforms/Changes around the USTax Reforms/Changes around the US
• Lower income tax rates until 2009Lower income tax rates until 2009• Sales Tax
R i l t t– Raise sales tax rates– Seek tax on remote sales– Tax more services
• Business tax reform• Raise alcohol and tobacco tax rates• Property tax growth capsProperty tax growth caps
January 2011 9
Maximum Individual Income Tax Rates, 2010Maximum Individual Income Tax Rates, 2010
CALIFORNIA
WEST VIRGINIAWISCONSINNEW JERSEYNEW YORK
MASSACHUSETTSOHIO
KENTUCKYWEST VIRGINIA
ILLINOISPENNSYLVANIA
INDIANAMICHIGAN
0 0% 2 0% 4 0% 6 0% 8 0% 10 0% 12 0%
FLORIDATEXAS
ILLINOIS
0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0%
January 2011 10
Reduction in the Income Tax Rate ( h l )(1985 to 2007 Highest Marginal Rate)
January 2011
Up to 6.4%‐‐22‐‐
At least 6.5%‐‐5‐‐
No Reduction‐‐14‐‐
NA‐‐9‐‐
11
Individual income tax rate changes in 2009 and 2010g
Increase (10)
Decrease (5)
No change (35)
h d
Note: Vermont and New Jersey had more than one rate change over the two year span. Shown is the direction of the most recent change.
January 2011 12
Source: The Tax Foundation.
Change in Sales Taxes, l bJuly‐September, 2009 to 2010
U.S. = 4.1%
Greater than 5.0%14
3.0% to 5.0%Less than 3.0% NA/ND7
January 2011 13
‐‐14‐‐‐‐14‐‐‐‐15‐‐ ‐‐7‐‐
STATE SALES TAX RATES, 2010STATE SALES TAX RATES, 2010CALIFORNIA
MASSACHUSETTSTEXAS
INDIANANEW JERSEY
PENNSYLVANIAWEST VIRGINIA
ILLINOISMASSACHUSETTS
OHIOFLORIDA
KENTUCKYMICHIGAN
0.0% 1.0% 2.0% 3.0% 4.0% 5.0% 6.0% 7.0% 8.0%
NEW YORKWISCONSIN
January 2011 14
NUMBER OF SALES TAX RATE CHANGESNUMBER OF SALES TAX RATE CHANGES
10
12
s
Decreases
Increases
6
8
of C
han
ges
2
4
Nu
mbe
r
082 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
January 2011 15
Sales tax rate changes in 2009 and 2010Sales tax rate changes in 2009 and 2010
D.C. had a sales tax rate increase.
Increase (10 including D.C.)
Decrease (0)
No change (41)
Source: The Tax Foundation
January 2011 16
Source: The Tax Foundation.
Wisconsin Sales Tax Base as a Share of lPersonal Income, 1979‐2009
55.0
50.0
of PI (%)
45.0
se as s
hare o
35.0
40.0
Sales tax bas
30.0
979
980
981
982
983
984
985
986
987
988
989
990
991
992
993
994
995
996
997
998
999
000
001
002
003
004
005
006
007
008
009
S
19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 19 20 20 20 20 20 20 20 20 20 20
January 2011 17
18ESTIMATED TOTAL E‐COMMERCEESTIMATED TOTAL E COMMERCE SALES
*Sales‐taxing states only.
January 2011
Composition of Total State and Local BusinessComposition of Total State and Local Business Taxes, FY2009
Source: Ernst & Young. “Total state and local business taxes: State‐by‐state estimates for fiscal year 2009.” March 2010.
January 2011 19
Change in Corporate Income Taxes, l bJuly‐September, 2009 to 2010
U.S. = (2.5)%
Greater than 25.0%‐‐17‐‐
0.0% to 25.0%14
Less than 0.0%13
NA/ND‐‐6‐‐
January 2011 20
17‐‐14‐‐‐‐13‐‐ 6
State Corporation Net Income and pLicense Tax Base
January 2011 21
Types of Business Tax ReformTypes of Business Tax Reform
• New tax structures – Ohio, Michigan, TexasNew tax structures Ohio, Michigan, Texas• State efforts to reduce tax planning
– Combined reportingCombined reporting– Disallow/addback deductions between related companies ‐Massachusetts
– Economic nexus ‐ Impose nexus on passive investment companies – South Carolina
– Examine passive investment companies for validExamine passive investment companies for valid business purposes ‐Maryland
– Audit transfer prices
January 2011 22
