U.S. Corporations Need to Be Competitive at Home and Abroad

Washington, DC, February 21, 2012—Raising taxes on U.S. corporations with operations abroad will not help create jobs, but will only succeed in making American companies less competitive overall which means fewer jobs at home, according to a new video from the Tax Foundation.

"Prominent politicians, including President Obama, have suggested that companies that 'ship jobs overseas' should be subjected to higher corporate tax rates, but that characterization fundamentally misstates how the modern business world functions," said Tax Foundation president Scott Hodge.

Over the next five years, the global economy is expected to expand by over $21 trillion, with 85% of that demand for new goods and services occurring in countries outside the U.S. When American corporations compete for that new business, some companies will make products here and ship them to customers overseas, but for others, the best way to win new business will to make their products as close to their overseas customers as possible.

"Serving international customers means understanding market conditions all over the world – because even in a global economy, all business is local," said Hodge.

When U.S. companies expand overseas, some in Washington worry that American jobs are left behind here at home. In reality, however, when American companies are successful abroad, it means more opportunities for American workers.

The more people a U.S. company employs abroad, the more skilled workers they need here in America. A growing international firm is going to need more employees providing manufacturing inputs, management expertise, research and development, and cultivating other abilities.

Unfortunately American companies looking to compete overseas are at a disadvantage because of the U.S. corporate tax rate, the second highest in the world at 35%. That burden makes American products less competitive, no matter where they are made.

"Punishing successful companies for serving their international customers will not bring jobs homes to the U.S," said Hodge. "Trying to force businesses to abandon their operations overseas will simply result in fewer successful American companies. As the video says, we can’t win here if we don’t win there."

Watch the full 4-video series on YouTube.

Script: "Corporate Taxes: Winning"

There are more than 7 billion people on earth.

That’s over 7 billion people who need stuff.

Stuff, like cell phones, computers, shampoo and bottled water.

Some estimate that all this new stuff will mean more than $21 trillion in new business over the next five years.

85% of that new demand will occur outside the US in fast-growing countries. [Source: The International Monetary Fund, 2011]

And, of course, there are a lot of companies around the world competing for that new business.

Now, to try and get some of that business, some American companies will make stuff here and ship it to customers overseas.

But for other American companies, the best way to win new business is to make stuff as close to their customers as possible, because even in a global economy all business is local.

Some in Washington worry that when American companies make stuff abroad, it costs jobs here at home.

But the truth is, when American companies succeed overseas, it means MORE work here at home.

You see, for every worker that a US company has abroad, they need plenty of skilled people back here in America.

Like scientists, factory workers, engineers, and programmers.

But, unfortunately American companies looking to compete overseas are at a disadvantage because of our tax rate.

U.S. companies are burdened with one of the highest corporate tax rates in the world at 35 percent.

This means American products are less competitive – no matter where they are made.

And since our competitors make their own products near those same customers, AND pay a lower tax rate, we struggle to compete.

Now some suggest that raising taxes on American companies that make products overseas will bring jobs back home, especially if we also lower taxes here.

But raising taxes on foreign sales will only make American products even less competitive.
And that means FEWER jobs here at home.

That’s bad news for the American scientists, factory workers, and engineers whose jobs depend on selling to customers all around the world.

So if we want to sell American products, supported by American workers, to those 7 billion people, we have to have a competitive tax system.

Because we can't win here if we don't win there.

For more information go to Tax Foundation dot org.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

Case Study: Recommendations for North Dakota

 Washington, D.C., February 16, 2011--At the request of the North Dakota Taxpayers Association, the Tax Foundation has offered a list of recommendations to improve North Dakota's business tax climate. The recommended reforms are an example of the kind of changes many states could adopt to improve their own ranking on the Foundation's frequently-cited State Business Tax Climate Index.

The Index which the Tax Foundation produces annually enable business leaders, government policymakers, and taxpayers to gauge how their states' tax systems compare according to the economic principles of simplicity, neutrality, and broad tax bases with low tax rates. The states with tax systems that embrace those values most consistently end up ranked the highest.

The recommendations for North Dakota's tax system include changes to the state corporate income tax, individual income taxes, sales tax, and unemployment insurance tax. Tax Foundation economist Mark Robyn proposes eliminating tax credits for corporations, moving to a flat state income tax, and eliminating the sales tax on business-to-business transactions while broadening the base to include services.

Reforms along these lines can affect revenue totals. While the Tax Foundation recommends specific base-broadening changes, the analysis does not include any specific corresponding rate reductions in the analysis, for two reasons. First, state revenue officials are best positioned to estimate revenue effects. Second, North Dakotans must decide for themselves whether they want tax reform to raise the same amount of revenue or reduce revenue.

"If all of the changes listed in the new analysis had been in effect on July 1, 2011, North Dakota would have ranked fifth overall in the 2012 edition of the Index, instead of 29^th," said Robyn. "Given that the largest change from 2011 to 2012 was only twelve places, this would represent a dramatic improvement."

Tax Foundation Fiscal Fact No. 292, "Recommendations for North Dakota's Tax System" by Mark Robyn is available online. More information on North Dakota is available here.

Tennessee, Arizona Have Highest Combined Sales Tax Rates

Washington, D.C., February 14, 2012—Tennessee, Arizona, Louisiana, Washington, and Oklahoma have the highest combined state and average local sales tax rates, according to a new report released today by the Tax Foundation. On the other end of the scale, Delaware, New Hampshire, and Oregon all have no state or local sales taxes, thus scoring combined rates of zero.

"While state sales taxes are generally easier to understand than the federal income tax system, the existence of thousands of local jurisdictions that set their own rates can lead to confusion" said Tax Foundation economist Scott Drenkard. "States with a moderate statewide rate can end up with an extremely high burden when local rates are added to the total."

Thirty-six states allow localities to charge a local sales tax. These local rates range from very low - such as 0.25 percent in Tupelo, Mississippi - to quite high, as in the case of the 7 percent rate in Wrangell, Alaska. Because local rates vary so dramatically and sometimes apply to very small jurisdictions, the Tax Foundation calculates a population-weighted average for each state.

The states with the highest combined state and local rates are Tennessee (9.45 percent), Arizona (9.12 percent), Louisiana (8.85 percent), Washington (8.80 percent), and Oklahoma (8.66 percent). Among the states with a statewide sales tax, the lowest average combined rates are found in Hawaii (4.35 percent), Maine (5.00 percent), Virginia (5.00 percent), Wyoming, (5.34.percent), and South Dakota (5.39 percent).

California, despite a 1 percent reduction in its sales tax rate that took effect July 1, 2011, still has the highest state-level rate at 7.25 percent. Five states tie for the second-highest statewide rate with 7 percent each: Indiana, Mississippi, New Jersey, Rhode Island, and Tennessee.

The states with the highest average local sales tax rates are Louisiana (4.85 percent), Colorado (4.54 percent), New York (4.48 percent), Alabama (4.33 percent), and Oklahoma (4.16 percent). The states with the lowest non-zero average local rates are Minnesota (0.30 percent), Vermont (0.14 percent), Idaho (0.02 percent), Mississippi (0.004 percent), and New Jersey (-0.03 percent). New Jersey has a unique system in which certain jurisdictions are exempt from collecting the 7 percent state tax and instead collect a 3.5 percent local tax. This results in a slightly negative statewide average local rate.

The Tax Foundation is a nonpartisan, nonprofit organization that has monitored fiscal policy at the federal, state and local levels since 1937.

 Tax Foundation Fiscal Fact No. 291, "State and Local Sales Taxes in 2012," by Scott Drenkard is available online. To schedule an interview, please contact Richard Morrison, the Tax Foundation's Manager of Media Relations, at (202) 464-5102 or morrison@taxfoundation.org.

Greater Impact from Reductions in Corporate, Personal Income Taxes

Washington, DC, February 8, 2012—While Congress considers extending a payroll tax cut in order to stimulate the economy, a new study from the Tax Foundation finds that payroll tax cuts have little to no impact on long-term economic growth. If policymakers are looking to stimulate the economy, they should be considering reductions to the corporate income tax and the individual income tax.

Recent research on similar countries shows that cutting the corporate income tax provides the most bang for the buck when it comes to economic growth,” said Tax Foundation economist Will McBride. "Given that the U.S. will soon have the highest corporate rate in the developed world, we have plenty of room to make reductions that will both make U.S. companies more competitive and stimulate domestic growth."

The political debate over the payroll tax holiday has revolved around possible short term growth effects, when in fact the bigger issue is a long run growth slowdown.  Since 2000 the U.S. has grown at a rate that is well below the average for similar economies. Over this period, social security payroll taxes do not appear to have any significant effect on long term economic growth.

In contrast, corporate income taxes have a highly significant and negative effect on long term growth.  Using data from the Organization for Economic Cooperation and Development (OECD), McBride's research suggests that cutting the corporate rate by 10 percentage points is associated with an increase in cumulative real GDP growth of 11.1 percentage points.  Personal income taxes on high incomes also have a significant negative effect on growth, such that cutting the rate by 10 percentage points is associated with an increase in cumulative real GDP growth of 7.5 percentage points over this period.

"The fastest growing economies in the OECD all have below average tax rates on both corporate and high income earners," said McBride. "The only one of the three major taxes where the U.S. boasts a lower rate is payroll – the one that matters the least for long term growth."

Tax Foundation Fiscal Fact No. 290, “Global Evidence on Taxes and Economic Growth: Payroll Taxes Have No Effect” by Will McBride is available online.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

New Video Documents High Effective Rates

Washington, DC, February 6, 2012—U.S. companies pay among the highest corporate tax rates in the world, even after accounting for all deductions and loopholes, according to a new video produced by the Tax Foundation. This explanation of "effective" tax rates for corporations, based on recent academic studies of tax systems around the globe, is the third in a 5-part series on corporate taxes.

"The impression that a large number of U.S. companies are using loopholes and creative accounting to get out of paying taxes could not be more wrong," said Tax Foundation president Scott Hodge. "American corporations are consistently paying at the highest levels in the world, and that burden impacts their ability to compete both at home and abroad."

The U.S. currently has the second highest tax rate on corporations, and will soon become number one when Japan implements a planned rate cut later this year. When the average corporate tax rate on the state level is added in, the total is almost 40%. After deductions, the effective rate naturally falls several points, but remains well above the average for developed countries and our closest trading partners.

"Pointing to a handful of prominent companies with unusually low tax payments makes for catchy headlines, but in no way tells the real story," said Hodge. "The data on American businesses in general is clear: they’re paying much higher rates than their foreign competitors. That’s a problem, and comprehensive tax reform is the answer."

The Tax Foundation video "Effective Corporate Tax Rates" is available online.

Previous installments focused on the advantages of a territorial tax system and how the U.S. has fallen behind by standing still on tax policy.

Script: "Effective Corporate Tax Rates"

The U.S. has one of the highest corporate tax rates in the world at 35% -- almost 40% when you add in state taxes.

But, just like you and I get to deduct things like our mortgages and charitable contributions, corporations get to deduct things too – like the cost of research and development and building a factory.

These deductions – what some call “loopholes” – save businesses about $100 billion a year according to the U.S. Treasury.

And from what you hear in the press, you’d think that all those “loopholes” would help American companies compete against businesses from lower-tax countries.

It turns out that is not the case when you compare what is called the 'effective tax rate.' The "effective tax rate" is the tax rate that companies ACTUALLY pay after their deductions.

You see, other countries give tax breaks too and more than a dozen international studies have compared the effective tax rates US companies pay to the effective tax rates paid by companies in other countries.

And, no matter how you measure it, American companies almost always pay the highest effective tax rates.

Take this new World Bank study, for example. They looked at the effective tax rates paid by a typical company in 183 countries around the globe. They found that 164 countries have lower effective corporate tax rates than the U.S.

The global average rate, 16%. Our average rate, nearly 28% [27.6%].

Only New Zealand, Chad and a handful of much smaller countries had higher rates than the US.
[citation: World Bank/PWC “Paying Taxes 2012”]

Another study by British economists at Oxford University compared the average tax rates for a range of industries in 19 of the biggest economies in the world.

The US didn’t stack up so well.

The average rate for industries in the US, 34.9%.

But industries in countries such as Korea (19.8%), China (22.4%), Canada (25.7%), United Kingdom (26.3%), Germany (27%), and India (29.5%), all paid lower rates. Only Japan had a higher rate.

[citation: Devereux, et.al. (2011)]

And a study by American economists comparing the effective tax rates of large businesses in 15 countries found that US companies tended to pay among the highest tax rates.

Companies in places like Sweden (18%), Taiwan (18%), France (23%), and South Africa (25%), all paid lower effective tax rates than US firms (28%).

Only Japanese companies (36%) paid a consistently higher tax rate than those in the US. 
[citation: Markle/Shackelford (2011)]

But, Japan is cutting their corporate tax rate this year, which will leave us standing with the highest rate among large economies.

So not only do other nations offer lower rates, but their territorial tax systems can lower the tax burden for their companies even further.  It’s no wonder that they can out-compete US firms who pay high tax rates AND a second-layer of tax because of our worldwide tax system.

Headlines about a few companies that pay little in taxes may make for juicy political sound bites, but they don’t tell the whole story.

No matter how you look at the data, U.S. companies are paying one of the heaviest tax burdens in the world, and until our system is more competitive, we will struggle to keep jobs and industries in our country.

For more information visit tax foundation dot org.

The Tax Foundation video "Effective Corporate Tax Rates" is available online.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

Gap between Rich and Poor Driven by Business Cycle

Washington, DC, January 30, 2012- Contrary to recent reports suggesting that Bush-era tax cuts have increased income inequality in the U.S., the gap between rich and poor in recent decades has been driven mostly by the business cycle, i.e. multi-year fluctuations in economic activity, according to a new report by the Tax Foundation.

"Inequality generally increases during eras of growth and economic expansion and decreases during recessionary times," said Tax Foundation economist Will McBride. "Changes in tax rates on high-income earners over the last two decades have been incidental to this trend."

Historically, income inequality in the U.S. reached a peak in the 1920s, falling in the decades afterward and eventually rising again in the 1980s and 1990s. This rebound has been attributed to everything from globalization and immigration to the growth of super-star salaries and the computer revolution. All of these factors, however, might better be described as simply the reasonable outcomes of a growing market economy.

The resurgence of inequality in recent decades has also been attributed to tax policy. Based on the most recent IRS data, income inequality has fluctuated considerably since 2000 but is now at about the level it was in 1997. Thus, the Bush-era tax cuts, which had provisions benefitting both high- and low-income taxpayers, did not lead to increased income inequality. By contrast, inequality rose 12% between 1993 and 2000, following two tax rate increases on high-income earners. Thus, changes in inequality over the last two decades appear to be driven more by the business cycle than tax policy.

Levels of inequality can also be made to appear higher than they actually are based on how researchers present the data. The most recently published studies on income inequality use either 2006 or 2007 as their end point, without fully correcting for the business cycle. Since the peak in 2007, personal incomes have collapsed to a degree not seen since the Great Depression. The most dramatic collapse has been in high incomes. Since 2007, for example, the number of millionaires has dropped 40 percent, while income reported by millionaires has dropped in half.

"It is not evident that the Bush tax cuts in either the top marginal rate or capital gains rate had any long term effect on inequality. If anything, they appear to have reduced inequality," said Tax Foundation economist Will McBride. "Therefore, a return to Clinton-era tax rates would not necessarily reduce inequality."

Tax Foundation Fiscal Fact No. 289, "Reversal of the Trend: Income Inequality now Lower than it was Under Clinton" by Will McBride is available online.

The Tax Foundation has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation's Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org

Tax Foundation Releases Rankings on "Business-Friendliness" of State Tax Systems

Washington, DC, January 25, 2012 -- Wyoming, Florida, and Texas rank among the ten best states for taxes on business, while companies in states like New York, New Jersey, and California have a far less pleasant tax climate to deal with, according to a new report by the Tax Foundation.

The State Business Tax Climate Index, now in its 8th edition, accounts for dozens of state tax provisions, creating a single easy-to-use score that measures each state against the tax climates of every other state. Each state's ranking is therefore relative to the actual tax policies in place around the country, not a measurement against a theoretical "perfect" system.

The Index enables business leaders, government policymakers, and taxpayers to gauge how their states' tax systems compare. While some similar studies focus on the total amount residents pay in taxes each year, the Index focuses on how the elements of a state tax system enhance or harm the competitiveness of a state's business environment.

"Even in our global economy, a state's stiffest and most direct competition often comes from other states," said Tax Foundation economist Mark Robyn. "State lawmakers need to be aware of how their states' business climates match up to their immediate neighbors and to other states in their region."

The 10 best states in this year's 2012 Index are Wyoming (#1), South Dakota (#2), Nevada (#3), Alaska (#4), Florida (#5), New Hampshire (#6), Washington (#7), Montana (#8), Texas (#9), and Utah (#10). Many of these states do not have one or more of the major taxes, and thus do not have the associated complexity and distortions.

The 10 lowest ranked, or worst, states in the 2012 Index are Iowa (#41), Maryland (#42), Wisconsin (#43), North Carolina (#44), Minnesota (#45), Rhode Island (#46), Vermont (#47), California (#48), New York (#49), and New Jersey (#50). While New Jersey remained steady compared with 2011, Rhode Island improved by implementing a modest income tax reform. The states in the bottom ten generally have complex, non-neutral taxes with comparatively high rates.

Illinois moved most dramatically in its Index rank over the past year, falling twelve places after a significant income and corporate tax increase. Other states seeing a decline in their ranking include Vermont, which fell four places, while Massachusetts and North Dakota both advanced four places up the chart.

In 2011, the State Business Tax Climate Index was downloaded 487,000 times and cited in hundreds of newspaper articles, editorials, and broadcast media reports. Four governors also cited the Index's findings in their State of the State addresses.

Tax Foundation Background Paper No. 62, "2012 State Business Tax Climate Index" by Mark Robyn is available online.

The Tax Foundation has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation's Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

Jon Huntsman Leads with B+, Santorum Trails with D+

Washington, DC, December 19, 2011--Taxes are at the top of the agenda in the 2012 presidential race, but the complexity of the competing candidates' plans can make them difficult to evaluate. To help clarify the issue, the Tax Foundation has reviewed the positions of the Republican nominees for President and assigned them letter grades based on how closely their plans are guided by the principles of sound tax policy.

Top of the class honors go to former Utah Gov. Jon Huntsman, who received a grade of B+, while former Pennsylvania Sen. Rick Santorum brought up the rear with a grade of D+. Herman Cain's plan is included for comparison purposes despite his campaign being suspended.

Tax Foundation Candidate Grades:

Huntsman: B+

Perry: B

Cain: B-

Paul: B-

Gingrich: C+

Bachmann: C

Romney: C-

Santorum: D+

Johnson and Roemer: incomplete

"We relied on candidate statements, websites, and all other available information for the specifics of each plan. We also took into account not only the specified ideal of each plan but the practical implementation as we see it," said McBride. "We believe this is the right approach, since the history of taxation tells us that the law and the practice are often two very different things." 

Tax Foundation economists judge every tax measure against the principles of economically sound tax policy, which say that taxes should be neutral to economic decision making, they should be simple, transparent, stable, and they should promote economic growth. From these principles, we have developed ten basic questions to judge the economic quality of any tax plan or proposal.

The basis for the candidates' grades are discussed in the recent study Tax Foundation Fiscal Fact No. 286, "How to Judge a Tax Plan" by Will McBride, Ph.D.

Information on the tax proposals of the current candidates for President of the United States is available on the Tax Foundation's Presidential Candidate Tax Plan Comparison page. Users can compare the plans side by side and click through to original source documents.

Candidate grades are provided for educational purposes only. The Tax Foundation is a nonprofit, nonpartisan organization and does not endorse or oppose any candidate for elected office.

The Tax Foundation has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation's Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

Washington, DC, January 11, 2012—As Congress debates whether to continue allowing taxpayers to deduct the amount they pay in state sales taxes from their federal returns, a new analysis from the Tax Foundation finds that states vary widely in the number of individuals taking the deduction, with the greatest impact seen in states that have a very low or no state income tax.

Taxpayers who itemize deductions have the option of deducting state and local taxes from their income. In doing so, each individual taxpayer must decide to deduct either the income tax withheld from his or her wages, or the total sales tax he or she paid during the tax year. The option of deducting sales taxes, however, expired on December 31^st, and will need to be renewed by Congress in order to be in effect for 2012.

States vary widely in the percentage of taxpayers who use each deduction. In general, more taxpayers elect to deduct income taxes than sales taxes. However, as one might expect, states that have no (or low) income taxes tend to see most taxpayers deducting sales taxes instead. Alaska, Florida, Nevada, South Dakota, Tennessee, Texas, Washington, and Wyoming are all states in which over half of the taxpayers elect to deduct state and local sales taxes, rather than income taxes, on their federal return, and these are all states that have either a very limited income tax (in the case of Tennessee) or no income tax at all.

Individuals who choose to deduct sales taxes have the additional option of reporting the exact amount (if they saved all their receipts) or using an estimate from the IRS that depends on their state and their income level. If the provision is not extended by Congress, sales taxes on purchases in 2012 will not be deductible, but tax paid on purchases made in 2011 will continue to be for returns filed this year.

Tax Foundation Fiscal Fact No. 288, “States Vary Widely in Number of Taxpayers Deducting State or Local Sales Taxes” by Nick Kasprak is available online.

The Tax Foundation has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

Washington, DC, January 9, 2012—Businesses in the United States face a strategic disadvantage when competing abroad due to the current structure of the U.S. tax code. Unlike most other countries in the world, the U.S. government taxes profits earned abroad on top of what companies pay to foreign countries. In order to spur greater investment and economic growth, the U.S. should follow the example of our closest trading partners and embrace a territorial tax system, according to the second in a new series of videos produced by the Tax Foundation.

The U.S. corporate tax system is out of step with the rest of the world and is unnecessarily handicapping the ability of American companies to compete with their rivals in places like Europe, China, and India,” said Tax Foundation president Scott Hodge. “Corporations should pay their taxes in the places they do business – not to governments around the world and then a second time to the U.S. Treasury.”

Washington’s goal should be to make the U.S. a competitive place both to do business in and do business from. The U.S. corporate tax system undermines both of these goals. Thus, the key to making the U.S. more competitive globally is to put our tax system on par with our major competitors. This means moving toward a territorial system for taxing foreign earnings, while also cutting the U.S. corporate rate.

The Tax Foundation video “Advantages of a Territorial System” is available online.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

Principles for Evaluating the Proposals of Politicians

Washington, DC, December 15, 2011 Tax reform has become in both Congress and the presidential primary campaign and will remain a key issue through the 2012 general election. While the various plans vary considerably in their scope and intent, it is important that they all be judged against a standard set of principles. A guide to those principles is now available from the Tax Foundation. 

"The ideal tax system should do only one thing - raise a sufficient amount of revenues to fund government activities with the least amount of harm to the economy," said Tax Foundation economist Will McBride, Ph.D. "By all accounts, the U.S. tax system is far from that ideal."

Tax Foundation economists judge every tax measure against the principles of economically sound tax policy, which say that taxes should be neutral to economic decision making, they should be simple, transparent, stable, and they should promote economic growth. From these principles, we have developed ten basic questions to judge the economic quality of any tax plan or proposal.

"An economically sound tax code is one that is conducive to long-term economic growth," said McBride. "History and economic research suggests that the closer a tax reform plan adheres to the principles of simplicity, transparency, neutrality, and stability the more likely it is to lead to a more prosperous America." 

Information on the tax proposals of the current candidates for President of the United States are available on the Tax Foundation's Presidential Candidate Tax Plan Comparison. Users can compare the plans side by side and click through to original source documents.

Tax Foundation Fiscal Fact No. 286, "How to Judge a Tax Plan" by Will McBride, Ph.D. is available at taxfoundation.org.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation's Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

Evaluate the Republican Contenders Side-by-Side

Washington, DC, December 12, 2011—How does Mitt Romney compare to Ron Paul on taxes? Does Newt Gingrich have a savvier plan than Michele Bachmann? With the new Presidential Candidate Tax Plan Comparison from the Tax Foundation, you can look at the tax policies of presidential candidates side-by-side and evaluate for yourself.

With the upcoming 2012 presidential election, tax policy is on voters’ minds more than ever. Taxes are one of the central issues in any national election, and it is important for the public to understand candidates’ general views toward tax policy as well as their positions on specific issues. The online Presidential Candidate Tax Plan Comparison outlines the candidates’ positions on the most important tax questions of this election.

“It can be a challenge for individual voters to wade through candidate statements, news reports, and attacks from opponents when trying to figure out how the candidates compare on the issues,” said Tax Foundation economist Will McBride. “Our Presidential Candidate Tax Plan Comparison tool gives voters the information they need to make apples-to-apples comparisons on where all of the candidates stand on tax policy.”

Ten presidential candidates were evaluated on six different parameters of tax policy: individual income tax rates, the corporate income tax, the estate tax, payroll taxes, the alternative minimum tax, and taxes on capital gains and dividends.

Data was collected from candidate questionnaires, campaign statements, and other publicly available information. Sources for all of the listed policy positions are cited and linked to, so users can easily have the opportunity to research the candidates more thoroughly.

Information is included on the following candidates for President: Michelle Bachmann, Herman Cain (campaign currently suspended), Newt Gingrich, Jon Huntsman, Gary Johnson, Ron Paul, Rick Perry, Buddy Roemer, Mitt Romney, and Rick Santorum. As candidates leave the campaign during the primary process, details of the plans they advocated will remain online for comparison purposes.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

Washington, DC, December 6, 2011—The respected trade journal State Tax Notes has named the Tax Foundation as its 2011 Organization of the Year. Tax professionals, academics, and lawmakers overwhelmingly chose the Tax Foundation as the organization they rely on most for state and local tax information.

“We’re honored to be chosen by State Tax Notes as their Organization of the Year,” said Tax Foundation Vice President of Legal & State Projects Joseph Henchman. “We are particularly excited to be honored this week, on the occasion of the 74^th anniversary.”

Excerpts from the State Tax Notes announcement:

“The Tax Foundation is State Tax Notes’ Organization of the Year.” 

“Over the past decade, the foundation has become a source of data, studies, and other fiscal information for tax professionals, legislative staffs, media, governmental affairs offices, and academics.”

“…the Tax Foundation gets high marks for its commitment to the principles of sound tax policy.”

“The foundation is relied on by major news organizations, public finance scholars, and legislative staff more than any other organization.”

“… the foundation has been on the correct side of most state and local tax issues in the past decade. And appropriately, it has received high marks from both liberals and conservatives.”

“Liberal lawmakers and organizations are often critical of the Tax Foundation’s positions. But State Tax Notes found that even the most ardently liberal legislators acknowledged, often grudgingly, that the foundation was generally right in its approach to tax policy.”

Read more from the Tax Foundation on Tax Policy in the 50 States.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.

New Online Tool for Consumers

Washington, DC, December 6, 2011—The Tax Foundation has created a new online calculator for tracking the tax burden created by the Patient Protection and Affordable Care Act, signed into law by President Obama in March 2010. The coverage provisions in the health care bill cost $788 billion in new spending over the next decade. This is paid for $511 billion in cuts elsewhere, as well as $420 billion in new taxes. This calculator shows how the new taxes will affect American households and explains how they work.

Last year’s health care law was complex and included dozens of provisions impacting Americans as consumers and taxpayers, so it’s not surprising that there’s a great deal of confusion surrounding the legislation,” said Tax Foundation analyst and programmer Nick Kasprak. “We hope the Health Care Tax Calculator will help individuals get a better idea of how revenue-raising provisions of the new law will collectively impact them.”

The Health Care Tax Calculator aggregates the cost of many different taxes included in the Patient Protection and Affordable Care Act using user-provided data, giving consumers an overall view of how those costs will affect their household budget. Main components include the “Cadillac tax” on employer-provided health plans above a certain cost, new payroll taxes on high-income earners, an annual fee on prescription drug manufacturers, and a new excise tax on medical devices.

We are glad to provide this tool to estimate tax costs, but users should remember that there are further costs to current health care laws as well,” said Kasprak. “For example, the impact of the individual and employer mandates, which are designed to change consumer behavior rather than raise revenue, need to be considered in addition to direct tax costs, as well as spending cuts to Medicare Advantage.”

In addition to the Health Care Tax Calculator , the Tax Foundation provides several other online data tools for consumers, taxpayers, and policymakers to examine the effects of taxes at the federal, state, and local level. Available tools include a searchable database of property taxes by county, the marginal tax rates calculator and graph, and state-to-state migration data.

The Tax Foundation is a nonpartisan research organization that has monitored fiscal policy at the federal, state and local levels since 1937. To schedule an interview, please contact Richard Morrison, the Tax Foundation’s Manager of Communications, at 202-464-5102 or morrison@taxfoundation.org.