The United States has long been a forward-thinking country that builds for tomorrow through saving, investment, and entrepreneurship. Saving gives us security, investment gives us rising incomes through enhanced productivity, and entrepreneurship drives economic growth and dynamism, creating new opportunities.
However, over the last fifty years, all three have been eroded. Citizens aren’t saving enough, businesses aren’t investing enough, and the country is undergoing a retreat in the level of economic growth and dynamism.
As it is, the U.S. tax code places substantial burdens on each of these essential factors of our economy. What’s worse, while other nations have become more attractive, there has been a proliferation of proposals in the U.S. that would only cause further harm—wealth taxes, “mark-to-market” capital gains taxes, estate taxes, and financial transaction taxes.
Below, we offer in-depth analysis of these and other proposals, which highlight a harmful trend in tax policy. Americans are industrious, entrepreneurial, and innovative. Policymakers should ensure we have a tax code that enhances those qualities, not hinders them.
Universal savings accounts would boost savings for low-income households, allowing them to better withstand economic shocks, such as pandemics and recessions, and plan for major expenses, such as an expanded family, education, and housing needs.
36 min read
Americans are saving less. While the U.S. saving rate has regularly lagged behind its peers, it has yet to return to pre-pandemic levels. Increasingly, people are turning to credit cards to fill the gaps in their budgets.
For U.S. policymakers looking to encourage greater saving and financial security, particularly among low- and moderate-income households facing serious affordability challenges, the experiences in both the UK and Canada indicate that universal savings accounts are an effective policy tool to help reach that goal.
4 min read
For most Americans, saving is a taxing experience. Our neighbors to the north have found a better solution—and U.S. lawmakers should take note.
5 min read
The uncertain future of American finances in a time of potential economic instability points to the need for tax reforms that encourage individuals to save and build financial security in a relatively simple way, such as through universal savings accounts.
6 min read
What has President Joe Biden proposed in terms of tax policy changes? Our experts provide the details and analyze the potential economic, revenue, and distributional impacts.
23 min read
New modeling finds that the wealth taxes proposed by Sen. Warren and Sen. Sanders would raise significantly less revenue than promised, face serious administrative and compliance challenges, and would increase foreign ownership of U.S. capital.
38 min read
A key element of America’s dynamism problem is a drop in entrepreneurship. Removing tax barriers for entrepreneurs would improve America’s dynamism while making America’s tax code more neutral, efficient, and simple for all taxpayers.
25 min read
Capital gains taxes create a burden on saving because they are an additional layer of taxes on a given dollar of income. The capital gains tax rate cannot be directly compared to individual income tax rates, because the additional layers of tax that apply to capital gains income must also be part of the discussion.
14 min read
The success of any mark-to-market system lies in its ability to accurately value tangible and non-tangible (or non-tradable) assets such as intellectual property and brand-value recognition. Administrative regulations, guidance, and enforcement are the Achilles’ heel of any plan to annually tax accrued gains.
17 min read
Policymakers should exercise caution in deciding whether to enact an FTT given the uncertainty regarding the FTT’s ability to raise revenue and the significant damage it could cause to the U.S. financial system
39 min read
Wyden’s “mark-to-market” proposal strives to subject capital gains to the same treatment as ordinary income. While the plan resolves the “lock in effect” issue and would make the tax code more progressive, it would increase the tax burden on savers and increase tax code complexity.
2 min read
Van Hollen’s proposals add to the long list of Democratic Party tax proposals that attempt to both raise additional revenue from corporations and high-income households and make the tax code more progressive and “equitable.”
3 min read
Warren’s comparison between the property tax and her proposed wealth tax makes a good sales pitch. However, there are important differences between the taxes. By no means is the property tax in many jurisdictions perfect, but it is generally better structured than a wealth tax.
4 min read
America’s tax code distorts the economic decision-making of firms, such as the favorable treatment of debt financing over equity. This study adds to this argument while providing motivation for policymakers to focus on how reforms to tax policy can increase American entrepreneurship.
2 min read
Capital gains taxes create a burden on saving because they are an additional layer of taxes on a given dollar of income. The capital gains tax rate cannot be directly compared to individual income tax rates, because the additional layers of tax that apply to capital gains income must also be part of the discussion.
14 min read
A key element of America’s dynamism problem is a drop in entrepreneurship. Removing tax barriers for entrepreneurs would improve America’s dynamism while making America’s tax code more neutral, efficient, and simple for all taxpayers.
25 min read
Federal tax rates vary by income group and tax source. The federal tax system redistributes income from high- and low-income taxpayers.
3 min read
Findings from a new study suggest that while a policy agenda to revive innovation must include an assortment of changes – including greater access to mentorship – tax policy matters too.
2 min read
While progressivity may look appealing—particularly at a time when policymakers in Congress seem to be competing on how best to extract revenue from the wealthiest in the country—it may not raise the revenue intended.
2 min read
The fall and then rise of entrepreneurial income claimed on the wealthy’s 1040 tax returns clearly tracks the seeming decline of inequality from 1950 to 1980, followed by the sudden rise in inequality since 1986. The shifting composition of income claimed by the rich due to changes in tax laws explains this illusion.
12 min read
There is a chance that Senator Warren’s proposed wealth tax would be found unconstitutional, but opinions are mixed and the precedents go both ways.
2 min read
Sen. Elizabeth Warren recently proposed a wealth tax on high-net-worth individuals, a type of tax that is poorly targeted, difficult to administer, and raises constitutional questions.
4 min read
A recent paper discusses two main trends related to U.S. entrepreneurs: the decrease in the number of entrepreneurs and the increase in their borrowing. Entrepreneurs have increased their debt holdings relative to their assets over the past three decades.
3 min read
The estate tax’s narrow base and high rate limit its ability to generate revenue. The estate tax discourages economic growth by discouraging investment.
3 min read
For every 1 percentage point increase in a state’s corporate tax rate, employment in start-up firms declines 3.7 percent, according to a recent Federal Reserve study.
2 min readEstate and inheritance taxes reduce investment, discourage business expansion, and sometimes drive wealthy taxpayers out of state. It’s little wonder that states are under pressure to reduce or eliminate them.
44 min read
Saving and investment are necessary for a society to adequately provide for its future. Saving and investment have declined substantially as a percentage of GDP over the last 40 years. American private saving barely keeps pace with total government deficits. On the whole, the country saves very little. American investment barely keeps pace with depreciation; U.S. private and public capital stock and infrastructure deteriorates almost as quickly as it can be repaired or replaced with new investment.
15 min read