After all, a lot of stuff we import goes into making other things in the United States. So these across-the-board tariffs are economically unwise and, I think, would be quite damaging if they’re something more than negotiating tools. In September 2019, the Trump administration imposed “List 4a,” a 15 percent tariff on $112 billion of imports, an $11 billion tax increase. They announced plans for tariffs on the remaining $160 billion to take effect on December 15, 2019. In September 2018, the Trump administration imposed another round of Section 301 tariffs—10 percent on $200 billion worth of goods from China, amounting to a $20 billion tax increase. In March 2018, President Trump announced tariffs on up to $60 billion of imports from China.
The visualization presents a breakdown of tax revenue sources, comparing figures from 1986 and 1996. The estimates are provided for a selection of country groups (you can switch country groups by clicking on the option ‘change country group’), and are expressed as a share of GDP. The data comes from Todaro and Smith (2014)9, and includes direct taxes (corporate and income taxes), as well as indirect taxes (general, commodity, and excise taxes) and social security contributions. Section IV explores empirical evidence on taxes and growth from studies of major income tax changes in the United States. Consistent with the discussion in Section III, the studies find little evidence that tax cuts or tax reform since 1980 have impacted the long-term growth rate significantly. All else being equal, countries with lower taxes appeal more to multinational companies (MNCs) and foreign direct investment 62,63.
- The absolute value of the negative relationship grows for three years of progressivity lag, as individuals respond to the changing tax code, after which continued adjustments diminish.
- All else being equal, countries with lower taxes appeal more to multinational companies (MNCs) and foreign direct investment 62,63.
- Financial assets include fixed-income claims—such as a checking account or a bond—corporate equity, and non-corporate equity.
- The chart, from OECD-KIPF (2014),11 shows the goods and services that are most commonly subject to reduced VAT rates in OECD countries.
Which taxes have the biggest impact on growth?
As another example, taxes that are highly redistributive may conflict with the efficient allocation of resources required to achieve the goal of economic neutrality. The Brookings Institution is a nonprofit organization based in Washington, D.C. Our mission is to conduct in-depth, nonpartisan research to improve policy and governance at local, national, and global levels. Holding onto land without using it, purely for speculative purposes, is costly. But developing land as much as possible increases returns without increasing taxation.
In fact, he thinks tariffs may have discouraged businesses from investing because it made the imported capital goods more expensive. And finally, he points out that the growth in that period, the growth in productivity or output per hour of work, was most rapid in sectors like utilities and services, which had nothing economic effects of taxation to do with tariffs. We had tariffs and a lot of growth in the late 19th century, but one didn’t cause the other.
I mean, honestly, if the president declared that every federal employee in Washington, D.C., had to come to work five days a week in person, I think people would quit and they wouldn’t be replaced. Until the day, which I predict will come at some point, where Donald Trump decides that Elon Musk is just taking too much of the limelight and they’ll have a falling apart, ’cause I don’t think that Trump wants that much attention to somebody other than himself. Tariffs featured heavily in the 2024 presidential campaign as candidate Trump proposed a new percent universal tariff on all imports and a 60 percent tariff on all imports from China, as well as potentially higher tariffs on EVs from China or across the board. In 2024, the Biden administration removed separate exemptions for bifacial solar panels from the Section 201 tariffs.
How progressive is taxation at the top of the income distribution in developed countries?
While increasing labor supply might seem to lower wages, firms often respond by increasing investment, maintaining or even raising average wages over time. Immigrants frequently fill roles that native-born workers are less inclined to take, reducing direct competition. Rep. Brendan Boyle (D-Pa.), the top Democrat on the House budget committee, said the CBO’s analysis proves Republicans are lying about the impact of the tax cuts on the budget deficit. In 2017, the GOP pointed to the dynamic estimate to claim a lower real-world cost of the tax cuts then, and that idea could be revived next year.
Analysis of Harris’s Billionaire Minimum Tax on Unrealized Capital Gains
Tax policies affect the type and amount of income subject to taxation and the rate at which it is taxed. Changes in the tax codes influence the decisions people make about whether and how much to work, how much to save for retirement, and where to live. Taxation also affects how entrepreneurs organize their businesses, how much to borrow and invest, and where they locate the businesses they create.
State Corporate Taxes and Local Economic Activity
The chart, from Besley and Persson (2013)1, plots the cross-country relationship between political institutions and tax revenues. The authors approximate the strength of political institutions by calculating the proportion of years since independence (or since 1800 if independence is earlier) that a country had strong constraints on the executive. Having ‘strong constraints on the executive’, in turn, is measured with data from the Polity IV database. In essence, this variable aims to capture the extent to which accountability groups impose institutionalized constraints on the decision-making powers of policymakers.
In 2010, unauthorized immigrant households contributed over $10 billion in state and local taxes alone. The effects of the policy can be identified by studying local labor markets with greater exposure to the industries that benefit the most from it. Figure 2 plots the results of an event-study analysis showing that the introduction of the policy in 2001 led to significant employment growth in locations with greater exposure to bonus depreciation. Increasing a location’s exposure to bonus depreciation from the 25th to the 75th percentile of the distribution increased employment by 2.1 percent on average over the sample period. The estimates suggest that every job created by this policy cost taxpayers between $20,000 and $50,000.