Tax Freedom Day 2015 (April 24th)

The Tax Foundation calculates the 2015 Tax Freedom Day as April 24, 2015.

This is calculated as the day of the year when the nation as a whole has earned enough money to pay its total tax bill for that year.

Tax Foundation Key Findings:

• Americans will spend more on 2015 taxes than they will on "food, clothing, and housing combined."
• Americans will pay 31% of the nation's income in taxes.
• Americans will pay $3.3 Trillion in federal taxes, $1.5 Trillion in state and local.
• Washington residents Tax Freedom day: April 29, 2015
• Idaho residents Tax Freedom day: April 14, 2015.

Graphic from the Tax Foundation:

Rubio Tax Reform Plan

Presidential hopeful Senator Marco Rubio has released his proposed "Rubio-Lee Tax Reform Plan." The Tax Foundation has conducted thorough research and analysis on the plan. The key findings are included below. The plan attempts to drive growth by creating lower cost of investment (i.e. full expensing, corporate integration, lower tax rates on business) and by increasing incentives for people to work (in the form of lower rates on personal income).

The key features of Rubio-Lee plan as reported by the Tax Foundation:

• Personal Income Taxes
  • New child tax credit ($2,500) no income cap.
  • Two brackets (15% and 35%).
  • Eliminate all itemized deductions except charitable contributions & mortgage interest deduction.
  • Replace standard deduction and personal exemption with refundable personal credit.
• Business Taxes
  • Top tax rate of 25% for both corporate and noncorporate business income.
  • Full expensing for businesses (i.e. business may deduct 100% of the cost of investment in the year it occurs.)
  • Integrate corporate and shareholder dividend taxes to eliminate the "double taxation" applicable to C-Corporations.
  • Eliminate most business tax credits and special deductions.
• Estate Tax
  • Eliminate the Estate Tax.

Key Findings of The Tax Foundation's Analysis"

• Economic Growth: Once the economy has adjusted to improved incentives of the Rubio-Lee plan, annual gross domestic product (GDP) will be 15% higher than it would otherwise (equivalent to an extra $2.7 Trillion in terms of 2015 GDP).
• Rubio-Lee plan would boost business investment by nearly 49%.
• Rubio-Lee plan would boost wages by 12.5%
• Rubio-Lee plan would raise level of employment by 2.7 million jobs.
• Implementation of the Rubio-Lee plan would reduce federal revenue by about $414 Billion annually (on a static basis).
• On a "dynamic basis", the Rubio-Lee plan will increase federal revenue by an annual $94 Billion in the long run, but there will be an estimated $1.7 Trillion revenue loss over the first 10 years.
• Plan would also benefit low-income earnings who will receive a large boost in after-tax incomes.

U.S. is in bottom 10% of OECD Countries for Tax Competitiveness

The Tax Foundation has recently issued its 2014 International Tax Competitiveness Index (ITCI) for the 34 OECD countries.

Overall, the United States ranked as 32^nd most competitive out of the 34 OECD countries (i.e. the bottom 10%). The ITCI notes that the largest factors behind United States's poor score are:

1. The US has the highest corporate income tax rate in the developed world (39.1%) (OECD average 25%),
2. The US is one of the only countries in the OECD that does not have a territorial tax system (the top 5 all have territorial tax systems),
3. The US has a relatively high progressive individual income tax (combined top rate 46.3%) which taxes both dividends and capital gains.

The top 5 and bottom 5 overall OECD Scores under the ITCI are:

	Country Name	ITCI Overall Score
1.	Estonia	100.0
2.	New Zealand	87.9
3.	Switzerland	82.4
4.	Sweden	79.7
5.	Australia	78.4
30.	Spain	50.8
31.	Italy	47.2
32.	United States	44.6
33.	Portugal	42.9
34	France	38.9

Within the OECD, the United States has the 3^rd worst tax environment as calculated by the ITCI. This puts it in the bottom 10% of the OECD. This has tremendous implications for long-term investment and job growth within the United States. Congress needs to address this reality and make our tax code more competitive with the rest of the OECD. As stated in the report:

In today's globalized world, capital is highly mobile. Businesses can choose to invest in any number of countries throughout the world in order to find the highest rate of return. This means that businesses will look for countries with lower tax rates on investments in order to maximize their after-tax rate of return. If a country's tax rate is too high, it will drive investment elsewhere, leading to slower economic growth.

Sales Taxes (nationwide) going up.

The Rockefeller Institutes reports that total State Tax collections were up 6.1% year-over-year from 2012 to 2013 (through the end of 3^rd quarter, 2013). In fact, Q3 (2013) was the 15^th consecutive quarter in which revenues were up. Of these revenues, personal income revenues rose 5.3%, sales revenues rose 5.6% and corporate tax revenues rose 1.9%.

These significant increases in personal income revenues and sales tax revenues indicate growth of both personal income and consumption from 2012 to 2013 and the increases in revenues bode well for State government financing.

Resource: http://www.ftportfolios.com/Commentary/MarketCommentary/2014/1/13/week-of-january-13th

Obama budget proposes capping some IRAs

According to Bloomberg, President Obama's budget plan proposed prohibiting taxpayers from accumulating more than $3 million in an individual IRA. It is unclear how the administration proposes to restrict IRAs in this way and where and why the administration used the $3 million limitation figure.