With Liz Truss appointed Prime Minister, it’s clear that the headline rate of the corporation income tax, the most economically damaging type of tax, will remain at 19 percent.
However, the headline rate was only one part of the corporate tax cliff edge that the #UK faced.
The super-deduction, which has temporarily made the UK tax system much more supportive of capital investment in plant and machinery, is also set to expire.
For many years, the #UK has adopted a strikingly ungenerous approach to capital cost recovery, creating a significant bias against investment.
This has coincided with consistently low levels of business investment.
Capital cost recovery is one of the most significant ways that the tax system weighs on economic growth.
The #UK ranked 33rd out of 37 OECD countries for ‘capital cost recovery’ on our 2021 International Tax Competitiveness Index.
The Treasury has considered making the system of capital allowances more supportive of investment and published a number of reforms, all of which would reduce marginal effective tax rates on new investment and boost investment, wages, and growth, according to our modeling.
𝘎𝘰𝘪𝘯𝘨 𝘣𝘦𝘺𝘰𝘯𝘥 the Treasury’s initial suggestions by extending genuine full expensing to structures and buildings would more than triple the economic impact of capital allowance reform, boosting long-run GDP by 2.5 percent.
The #UK should be as 𝗯𝗼𝗹𝗱 as possible when it comes to 𝗽𝗲𝗿𝗺𝗮𝗻𝗲𝗻𝘁 reform of capital allowances.
High up-front revenue losses should not necessarily be prohibitive, given their transitory nature, and can be reduced using an approach known as neutral cost recovery.
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The latest inflation report confirms that prices for just about everything continue to rise, with the Consumer Price Index (CPI) up 8.3 percent over the last year and many categories up even higher, including food (11.4 percent) and energy (23.8 percent).
While not part of the CPI, another measure of inflation is also surging: federal tax collections are up 23 percent over the last year, according to the latest data from the Congressional Budget Office (CBO).
Federal tax collections are approaching an all-time high of 20.5 percent of GDP set in 1943 during World War II.
The latest inflation report confirms that prices for just about everything continue to rise, with the Consumer Price Index (CPI) up 8.3 percent over the last year and many categories up even higher, including food (11.4 percent) and energy (23.8 percent).
While not part of the CPI, another measure of inflation (call it the Taxpayer Price Index?) is also surging: federal tax collections are up 23 percent over the last year, according to the latest data from the Congressional Budget Office (CBO).
The Inflation Reduction Act includes a 15 percent corporate minimum tax, drug price controls, IRS tax enforcement, and a tax hike on carried interest to pay for increased spending on energy and health insurance subsidies as well as deficit reduction.
[THREAD]
The on-again-off-again negotiations over the proposed #BuildBackBetter tax increases on corporations and high-income earners appears to be… on again.
Sen. Joe Manchin (D-WV) is now expressing support for something called the #InflationReductionAct. (2/9)
Next week, the Senate is scheduled to begin voting on a reconciliation bill that may put all of the #BuildBackBetter tax and spending increases on the table. (3/9)
The Senate has begun debate on the so-called Chips bill, which would provide $52 billion in grants and $24 billion in tax credits to supposedly strengthen the production of semiconductors in the U.S.
.@scottahodge: If this measure passes, U.S. semiconductors will join wool, mohair, helium, soybeans, ethanol, steel, credit unions, and Amtrak as industries thought to be so important as to warrant taxpayer subsidies—forever.
A better path: Fixing the bias against capital investment is preferable to pursuing industrial policy through the tax code, as subsidies tend to be ineffective and tariffs often weaken protected domestic industries and harm downstream industries.