A view from the ‘tanks’




Public debates on taxation in other countries can lose a little in translation – being necessarily specific to local arrangements.  We’ve sifted through current research from our counterpart think tanks in the US and UK to bring you some fresh ideas and the best of current thought on some of the more relevant tax issues.

Further Reading: Current papers on taxation from US and UK think tanks 

Institute of Fiscal Studies (UK)

Major Review of UK Tax System (for publication by OUP in 2009) headed by Nobel Laureate Professor Sir James Mirrlees of the University of Cambridge. This Review identifies the characteristics of a good tax system for any open developed economy in the 21st century, assesses the extent to which the UK tax system conforms to these ideals, and recommends how it might realistically be reformed. 

Institute of Public Policy Research (UK)

Current Major Paper (to be released in mid 2009): ‘Red and green taxes.’ How can the tax system be reformed so that it is more progressive and at the same time helps meet crucial environmental goals?This project uses a new tax-benefit model to develop recommendations for creating a fairer and greener tax system with a shift in taxation from income to carbon. 

New Economics Foundation (UK)

New Green Deal Report (July 2008 ) – The taxation aspects of the new green deal proposed by NEF include establishing an oil legacy fund, paid for by a windfall tax on the profits of oil and gas companies and minimizing corporate tax evasion by clamping down on tax havens and corporate financial reporting. The range of measures include deducting tax at source for all income paid to financial institutions in tax havens which would provide much needed sources of public finance at a time when economic contraction is reducing conventional tax receipts. 

Institute for Policy Studies (USA) 

Reversing the Great Tax Shift: 7 Steps to Finance our economic recovery fairly’ – This April 2009 paper recommends changes to the tax system for fairness and to promote the economic recovery. This includes proposals to collect $450 billion in taxes from those with the most ability to pay, discourage financial speculation and simplification of tax system.

‘Paying for a Strong Economy’ – a February 2009 paper which recommends tax changes to finance a strong economy. For example, the introduction of a modest financial transaction tax, changes to capital gains tax, estate tax introduction, closing overseas tax havens etc

‘Executive Excess 2008: How Average Taxpayers Subsidize Runaway Pay’ – An August 2008 paper on how the US tax code is riddled with loopholes that allow top corporate and financial leaders to avoid paying their fair share of taxes. Ordinary taxpayers wind up picking up the bill – to the tune of more than $20 billion per year. All five executive-friendly tax loopholes highlighted in the report are the targets of Congressional reforms. However, these efforts have stalled in the face of fierce opposition from corporate lobby groups. The report also finds that S&P 500 CEOs averaged $10.5 million in pay in 2007, 344 times the pay of typical American workers. 

Center on Budget and Policy Priorities (USA)

‘Benefits of a Financial Transactions Tax’ (December 2008) – This paper argues that this tax offers an attractive mechanism for raising revenue that is arguably efficiency-enhancing.

‘Tax Credit for Paid Time Off’ (March 2009)  – This paper argues for an employer tax credit for time off – it would provide short term economic stimulus, lower unemployment and promote more family friendly work. 

‘Evidence shows that tax cuts lose revenue’ (July 2008)  – This paper shows that the 2001 & 2003 income tax cuts did not increase economic growth and the capital gains tax cut lowered revenue in the long run. Deficit financed tax cuts carry significant costs that are unlikely to outweigh any short-term boost in economic growth.

‘The Senate and the Estate Tax’ (April 2009) This paper analyses the merits of the estate tax. In April 2009 the senate voted on an amendment to shrink the estate tax.

Center for American Progress (USA)

‘Earned Income Tax Credit’ – A January 2008 paper outlining how to improve targeting of credit for low income earners, as it was responsible for significant declines in poverty in the 1990’s.

‘15 New Ideas’ – A recent paper which includes taxing each source of income (whether dividend, capital gains, income etc) according to the same progressive rate structure, having 3 rates of tax (not 6) and simplifying the tax code by closing corporate and individual loopholes and eliminating the alternative minimum tax in a responsible manner.

‘More can be done to expand the child tax credit’– an April 2009 paper about ways to reduce poverty with this child tax credit. The credit should be made fully refundable so children in households without positive personal income tax liability can benefit; and the current restriction on the credit, that requires a minimum earned income level before the credit is available, should be scaled back.

Demos (UK)

In their new Demos book, The Liberal Republic,  Richard Reeves and Philip Collins call for higher taxation of unearned wealth, (7 May 2009)

Compass (UK)

Compass is outlining its Programme for Renewal in a series of three publications, two of which have been released.  The first, The Good Society,  considers the kind of society we want to live in. It argues that we are living in a social recession and puts forward an alternative politics based on wellbeing, care, equality and environmental sustainability.  The second, A New Political Economy, explores the economics of The Good Society. This report sets out a comprehensive route map for the centre-left to manage the forces of global capitalism in the interests of society.

Compass and its German counterpart have released a new declaration, Building the Good Society, which offers an alternative project to build a post- crisis social Europe. The tax system must contribute to a more equitable distribution of income and wealth. Low wage earners should not pay taxes. Those at the top must start paying their fair share and legislation must tighten tax loopholes and tax avoidance schemes.

Compass is currently conducting campaigns against tax avoidance and for the introduction of a windfall tax on the profits of  energy companies

Compass supports the recent introduction in the UK of a 50% tax rate for the super rich (top 1%) and reduction of the VAT tax to make the system more progressive. 

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