Michael Lodge, The Business Advisor

Tax Update

Jan 20, 2022

Michael Lodge, NCPM, CRTP: Tax issues change almost on a daily basis. I get more data on tax issues because I advise business on taxation and financial services. Today I received, from the Tax Foundation. Let's go over this valuable information. Updates are done when I get them to pass on. The more we know, the better we are prepared.

1.  Summary of the Latest Federal Income Tax Data

Income taxes paid: The latest IRS income tax data shows that reported income and taxes paid increased in tax year 2019, the second year of the Tax Cuts and Jobs Act and the last year before the onset of the COVID-19 pandemic.

How progressive? The data demonstrates the U.S. individual income tax continues to be progressive, borne primarily by the highest income earners:

  • The top 1 percent of taxpayers paid a 25.6 percent average individual income tax rate, which is more than seven times higher than taxpayers in the bottom 50 percent (3.5 percent).

Recent reforms: The 2017 Tax Cuts and Jobs Act reduced average tax rates across income groups. Explore the new data.

2. Bumpy Tax Filing Season Ahead Due to IRS Backlog and Pandemic Tax Relief

Tax season begins next week: Two major challenges await taxpayers: a second year of navigating pandemic-related tax relief on their returns and IRS backlogs that may delay processing and refunds.

It's all about trade-offs: The implementation issues at the IRS have exposed the trade-offs of using the tax code to administer social support, especially during the pandemic.

Back to basics: Policymakers should avoid further complicating the tax code and instead aim for simplification so taxpayers can better understand and comply with the tax code and the IRS can passably perform its core mission of tax collection. Learn more.

3.  What the U.S. Can Learn from the Adoption (and Repeal) of Wealth Taxes in the OECD

Important context: Discussions of a proposed wealth tax in the U.S. have included little information about trends in wealth taxation among other developed nations.

Trending down: According to the latest data, the number of OECD countries that have collected revenue from net wealth taxes has decreased from 12 in 1996 to just five in 2020.

Bad for the economy: Over the years, countries have repealed their net wealth taxes for various reasons, but economic impact is included in those reasons.

  • French Finance Minister Bruno LeMaire has made it clear that the partial repeal of the wealth tax in France was part of a reform package designed to “attract more foreign investment.” Learn more.


State Corporate Income Tax Rates and Brackets for 2022

Forty-four states levy a corporate income tax, with rates ranging from 2.5 percent in North Carolina to 11.5 percent in New Jersey. See the latest data.

Proposal to Raise Vapor Taxes in Washington State Gets Base and Rate Wrong

Washington lawmakers will consider a bill that would change the vapor tax base and increase the tax rate on vapor products. As our experts explain, these changes would be steps in the wrong direction. Read more.

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