As Tax Foundation president Scott Hodge wrote in a recent blog post, improving the tax treatment of residential investments is a good way to reduce construction costs and build more affordable housing. Under current law, when a company invests in building a new structure, it must deduct the cost of that investment over multiple decades.
Removing the tax code’s bias against long-term investment by implementing a neutral cost recovery system (NCRS) for structures and full expensing for other assets is estimated to increase economic growth and job creation. Using the Tax Foundation General Equilibrium Model, we estimate that permanent full expensing and neutral cost recovery for structures will add more
The Government Accountability Office (GAO) recently released a report revealing that almost a half-million taxpayers missed their total rebate payment due to complications over disbursing funds to non-filers with eligible dependents. Taxpayers who do not regularly file tax returns—usually those who do not owe tax because they earn lower incomes or who receive federal disbursements
A recent Brookings Institution study points out that “even before the COVID-19 crisis, housing affordability and instability were serious problems.” The study outlines a number of goals and strategies for increasing the supply of affordable housing, including federal subsidies, low-cost loans, and grants. These may well be viable solutions, but what is missing are policies
Tax policy wonks often advocate for increases in refundable tax credits (e.g., Child Tax Credit, CTC and Earned Income Tax Credit, EITC) and nonrefundable tax credits (Child and Dependent Care Tax Credit, CDCTC) as one solution to help low-income Americans. Arguments in favor of expanding these tax credits appear during economic expansions and contractions alike.
Key Findings In nearly two of every three households in America with dependents, more than one person works to make ends meet. In many cases, when two workers file jointly, they are penalized for having a second earner in the household. This is because the second-earner’s wages are subject to a higher marginal tax rate.
As the economic recovery is debated amid the coronavirus pandemic, there have been growing calls to include additional public investment in infrastructure such as transportation, airports, buildings, and broadband. Many have argued that the United States has outdated infrastructure and that has weakened the nation’s economic productivity and global competitiveness. As policymakers start thinking about
Americans are very generous people, and they give despite the reduced tax benefits of giving. That’s the takeaway from Giving USA’s latest annual report on the charitable contributions of individuals, corporations, and foundations. Altogether, Americans contributed nearly $450 billion to charitable causes in 2019. This is a record level of giving in nominal terms; adjusting
Full expensing for capital investment is being considered in the upcoming fourth round of coronavirus relief legislation. Though we tend to talk about full expensing as a long-run policy with long-run benefits, that does not mean it is meaningless in the short term. In fact, full expensing is good for both the long run and
Lawmakers can improve the cost recovery treatment of capital investment by allowing full expensing or by approximating full expensing by adjusting depreciation deductions to equal the present value of full expensing. This latter approach of capital cost indexing (sometimes called a neutral cost recovery system or NCRS) lowers the short-term cost of the policy to
There has been a considerable amount of talk recently from both the White House and Congress on the potential for a major federal infrastructure bill. While there are few details on what such a compromise would entail, the projects could run the gamut from roads and bridges to public schools and VA hospitals. There seems
The lockdowns imposed in response to the COVID-19 pandemic induced an increase in demand for broadband internet, as work from home and other social distancing measures pushed people to spend more time online. As broadband becomes a more important piece of America’s infrastructure, it makes sense to look at tax policy that will help drive
As policymakers explore options for additional business tax relief in “Phase 4” of coronavirus relief legislation, one idea that has received renewed attention over the last week is allowing businesses to cash out business tax credits allowed under Section 38 of the Internal Revenue Code. This proposal would be strengthened by also permitting acceleration of
One idea that would help the nation’s economic recovery during the coronavirus crisis would be moving to full expensing of capital investment. The depreciation debate might seem confusing, so the question at hand is: how, when, and by what amount can businesses recognize (or recover) the cost of a capital investment, like a piece of
Key Points: Legal recreational marijuana sales are ongoing in nine states, covering 27 percent of the U.S. population. In 2018, 10.5 percent of adult Americans had used marijuana products in the last 30 days. States have designed different excise tax systems for recreational marijuana. While most tax based on price, states also tax marijuana based
The digitalization of the economy has led more companies to adopt virtual operations, disrupting traditional means of consumption and income taxation. This has led to a heated debate on how best to tax the digital economy. Despite the OECD stepping in to negotiate a global framework, some countries have taken unilateral action, implementing problematic digital
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The economics world suffered a big loss over the weekend with the untimely passing of Alberto F. Alesina, the Nathaniel Ropes professor of political economy at Harvard. Alesina’s specialty was investigating the economic effects of political choices, such as which policies are most effective in addressing large fiscal deficits and national debts. U.S. lawmakers would
Key Findings Removing tax policy barriers can help businesses and individuals invest, work, create jobs, and lift the economy during a post-pandemic recovery without requiring lawmakers to create new spending programs. One of the most cost-efficient options available to lawmakers is to improve the cost recovery treatment of structures. Residential structures must be depreciated over
Today, lawmakers and the administration are exploring policies to meet the need to increase investment and economic output amid an economic downturn. Improving the cost recovery treatment of long-lived assets is a cost-effective tax policy change that can boost investment and growth. While full expensing is one approach and is a policy that lawmakers are