BEYOND THE NUMBERS
State of the Union Tax Roundup
In his State of the Union address last night, President Obama mentioned a number of tax policies we’ve written about. Here are some key facts and resources about four topics he discussed.
Corporate tax reform
The President highlighted that the current tax code creates incentives for companies to keep profits offshore, and he reiterated his previous calls for corporate tax reform.
For more, see:
- Our explanation of the tax code’s foreign tilt
- Our responses to President Obama’s corporate tax reform framework: Obama Proposal a Clear Step Forward, But Would Be Better With More Revenue and Don’t Put the Cart Before the Horse by Prematurely Setting a Top Corporate Tax Rate
Tax incentives for retirement savings
The President highlighted that tax incentives for retirement savings are upside down, channeling the bulk of those tax breaks to wealthy households and little to low- and moderate-income households that need the most help to save.
That’s the main reason why tax incentives for retirement savings plans, while costing well over $100 billion a year, appear to do little relative to their high cost to encourage new saving.
For more, see:
Expanding the EITC for childless workers
The President joined a growing bipartisan chorus calling for an expansion to the Earned Income Tax Credit (EITC) for childless workers. Doing so would extend the EITC’s proven pro-work and anti-poverty effects to childless workers, the only group of workers that the federal tax code taxes into — or deeper into — poverty. Expanding the very small EITC for childless workers could help address some of the challenges that less-educated young people face, including low and falling labor-force participation rates, low marriage rates, and high incarceration rates.
For more, see:
- Report: Strengthening the EITC for Childless Workers Would Promote Work and Reduce Poverty
- Commentary: One Anti-Poverty Initiative Both Sides Can Agree On
- Report: Earned Income Tax Credit Promotes Work, Encourages Children’s Success at School, Research Finds
- “Policy Basic” explainer on the EITC
Funding improvements to early childhood education
The President repeated his call to expand preschool education. His last budget proposed to finance this improvement to early childhood education by raising the federal excise tax on tobacco products.
Tobacco taxes are a proven strategy to reduce smoking, particularly among teenagers and low-income people, and reducing smoking rates would lead to substantial health gains. Youth and lower-income people would benefit disproportionately from improved health, partially offsetting the regressivity of tobacco taxes, and lower-income children and families would be the primary beneficiaries of the expanded availability of early childhood education that these tax revenues would finance.
For more, see:
