Category Archives: Taxation

IRS Announces 2012 Standard Mileage Rates, Most Rates Are the Same as in July

Source: Internal Revenue Service, Press Release, IR-2011-116, December 9, 2011

The Internal Revenue Service today issued the 2012 optional standard mileage rates used to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

Beginning on Jan. 1, 2012, the standard mileage rates for the use of a car (also vans, pickups or panel trucks) will be:
• 55.5 cents per mile for business miles driven
• 23 cents per mile driven for medical or moving purposes
• 14 cents per mile driven in service of charitable organizations

The rate for business miles driven is unchanged from the mid-year adjustment that became effective on July 1, 2011. The medical and moving rate has been reduced by 0.5 cents per mile.

Do Low-Income Workers Benefit From 401(k) Plans?

Source: Eric Toder and Karen E. Smith, Center for Retirement Research at Boston College, IB#11-15, December 2011

From the abstract:
401(k) plans – the main retirement savings vehicle for millions of workers – allow participants to save on a tax-deferred basis. This tax incentive is more valuable to workers in high-income families than workers in low-income families because they face higher marginal income tax rates. Not surprisingly, then, studies of the distributional effects of 401(k)s find that they mainly benefit high-income workers. However, these studies assume that employer contributions to 401(k)s do not affect the total compensation that each worker receives – that is, every worker “pays for” employer contributions in the form of lower wages. This brief challenges this assumption, testing whether employer contributions may actually increase total compensation for low-income workers, who may be more reluctant than high-income workers to accept wage reductions in exchange for retirement saving contributions.
See also:
Working Paper

Money For Something: Job Creation and Job Quality Standards in State Economic Development Subsidy Programs

Source: Philip Mattera, Thomas Cafcas, Leigh McIlvaine, Andrew Seifter and Kasia Tarczynska, Good Jobs First, December 2011

From the press release:
States are spending billions of dollars per year on corporate tax credits, cash grants and other economic development subsidies that often require little if any job creation and lack wage and benefit standards covering workers at subsidized companies. These are the key findings of Money for Something: Job Creation and Job Quality Standards in State Economic Development Subsidy Programs, a 51-state “report card” study published today by Good Jobs First…. Money for Something rates the performance standards and job quality requirements of 238 key subsidy programs from the 50 states and the District of Columbia that together cost more than $11 billion a year….

See also:
Executive summary
State-by-State Online Appendices (with scoring details)

Divided We Stand: Why Inequality Keeps Rising

Source: Organisation for Economic Co-operation and Development (OECD), December 2011
(subscription required)

From the abstract:
In the three decades prior to the recent economic downturn, wage gaps widened and household income inequality increased in a large majority of OECD countries. This occurred even when countries were going through a period of sustained economic and employment growth. This report analyses the major underlying forces behind these developments:
– Part I. How Globalisation, Technological Change and Policies Affect Wage and Earnings Inequalities
– Part II. How Inequalities in Labour Earnings Lead to Inequalities in Household Disposable Income
– Part III. How the Roles of Tax and Transfer Systems Have Changed
See also:
An Overview of Growing Income Inequalities in OECD Countries
Special Focus: Inequality in Emerging Economies
Press Release
Speech by OECD Secretary-General
Media Brief
Underlying Data
Multilingual Summaries
Country Notes
Income Distribution and Poverty Database

Subsidyscope: Pew’s Tax Expenditure Database

Source: Pew Charitable Trusts, 2011

Pew’s Subsidyscope presents the first-of-its-kind database of federal income tax expenditure estimates from the Department of the Treasury and the Joint Committee on Taxation (JCT). The database allows users to easily view specific estimates from the Treasury and JCT and make side-by-side comparisons. Users also can select and aggregate tax expenditures across 17 budget functions or economic sectors (such as energy or health) or drill down to find information about a particular tax expenditure.

Specifically, users can:
– Select a particular tax expenditure to find both the Treasury and JCT estimates reported each year from 2000 to the present.
– View aggregate tax expenditure totals for all individuals or all corporations, or individuals and corporations combined.1
– Access aggregate totals for all tax expenditures contained in each sector and compare the extent to which the federal government uses the tax code to subsidize various sectors of the economy.
– Examine how single or aggregate estimates change from year to year, based on historical estimates of each federal tax expenditure.
– Download data to perform individual analysis.

The Impact of State Income Taxes on Low-Income Families in 2010

Source: Phil Oliff and Nicholas Johnson, Center on Budget and Policy Priorities, November 15, 2011

From the summary:
The successful bipartisan effort over the last two decades to reduce state income taxes on working-poor families has stalled and is in danger of reversing. No new states exempted working-poor families from income taxes in 2010, and in most of the 15 states where such families still pay income taxes, they saw their income taxes increase….

…Despite the benefits of reducing taxes for poor families, some states required them to pay income tax bills of several hundred dollars in 2010. A two-parent family of four with annual income at the poverty line (which is $22,314 for a family of that size) owed $498 in Alabama, $292 in Hawaii, $238 in Georgia, and $234 in Oregon. Such amounts can make a big difference to a family struggling to escape poverty. Other states levying tax of more than $150 on families with poverty-level incomes were Illinois, Iowa, Montana and Ohio.

State Business Incentives: Trends and Options for the Future

Source: Jennifer Burnett, Council of State Governments, Capitol Research Special report, October 2011

From the summary:
During the past three decades, states have developed various incentive programs designed to encourage economic activity in order to create, retain or expand business opportunities.

In addition to tax and financial incentives, some states have used customized, company-specific incentives to engage in bidding wars with other states, making interstate competition for industries and businesses increasingly intense. Others have offered incentives to recruit business and financial investment from abroad….

…Now, in the face of severe fiscal turmoil, policymakers are looking at their incentive programs more closely to ensure they are truly getting a return on their investments. To help state policymakers make informed decisions, The Council of State Governments offers the third edition of State Business Incentives: Trends and Options for the Future. This report contains information and data on business incentives offered by states; trends in the types of incentives offered; discussion of the accountability and oversight of incentive programs; and policy options and courses of action for state policymakers to consider for the future.

A new feature for this year’s report is an accompanying Web tool that provides access to state business incentive profiles. The Web tool provides information about the state’s primary economic development agency or program and allows users to compare a number of measures across states, including:

* Current incentives offered
* Key tax rates including personal and corporate income and excise tax rates
* Key indicators such as educational attainment, income and population

Corporate Taxpayers & Corporate Tax Dodgers, 2008-2010

Source: Robert S. McIntyre, Matthew Gardner, Rebecca J. Wilkins, Richard Phillips, Citizens for Tax Justice, November 2011

From the summary:
280 Most Profitable U.S. Corporations Shelter Half Their Profits from Taxes.

“These 280 corporations received a total of nearly $224 billion in tax subsidies,” said Robert McIntyre, Director at Citizens for Tax Justice and the report’s lead author. “This is wasted money that could have gone to protect Medicare, create jobs and cut the deficit.”

* 30 Companies average less than zero tax bill in the last three Years, 78 had at least one no-tax year.
* Financial services received the largest share of all federal tax subsidies over the last three years. More than half the tax subsidies for companies in the study went to four industries: financial services, utilities, telecommunications, and oil, gas & pipelines.
* U.S. corporations with significant foreign profits paid tax rates to foreign countries that were almost a third higher than they paid to the IRS on their domestic profits.
See also:
Press release

The Local Crunch: How states pass the pain to cities and counties

Source: Stateline, October 2011

From the summary:
Tough economic times are taking a toll on the relationship between states and localities. In this series, Stateline examines what’s at stake as states cut local aid and shift responsibilities to cities and counties.
Articles include:
Part 1: Budget cuts reduce state aid to localities
Part 2: Property tax caps and their impact
Part 3: California reshapes local roles and revenue streams

Income Mobility and the Earned Income Tax Credit: Short-Term Safety Net or Long-Term Income Support

Source: Tim Dowd, John B. Horowit, Public Finance Review, Vol. 39 no. 5, September 2011
(subscription required)

From the abstract:
The authors use a unique data set of federal tax returns to analyze usage and participation patterns of the Earned Income Tax Credit (EITC) over the period 1989-2006. The authors find that most EITC recipients claimed the EITC for short periods, 61% for 1 or 2 years. Over the period examined, the EITC reached approximately 50 percent of the taxpayers with children. Finally, the authors find considerable income mobility among the EITC eligible population. Only 11 percent of those claiming the EITC in 1990 and in the third decile of income were in the same decile in 2003. They also find that 20 percent of EITC claimants claim the EITC for more than 5 years.