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Note: Excerpts below are from documents on the OECD's website (as of Feb. 1, 2006) that promote higher taxes for the United States. All quotes are in their original form and are unadulterated. "Assessment and Recommendations" …current tax concessions should be reconsidered. The unlimited tax exclusion of employer-furnished health benefits (amounting to about 1 per cent of GDP) encourages the purchase of costly insurance packages. Restructuring and capping the generous tax exemption for employer-sponsored health benefits could provide part of the answer. http://www.oecd.org/dataoecd/61/32/2762987.pdf Economic Survey of the United States, 2004 These measures should aim both at curbing outlays and, to the extent revenues have to be raised, broadening the tax base. To the extent that revenues have to be raised, this should be done primarily by broadening the tax base To broaden the tax base of the personal income tax, the deductibility of mortgage interest (regardless of the use of the loan) and of charitable donations should be phased out, as should the unlimited exclusion of employer health insurance plan premia. As to the corporate income tax, base-broadening efforts should focus on exemptions that reduce revenues and create inefficiencies, such as sectoral tax shelters. a further move to a consumptionbased tax system through the introduction of a nationwide value added tax (VAT) should be considered. http://www.oecd.org/dataoecd/34/12/31483632.pdf COPING WITH THE INEVITABLE ADJUSTMENT IN THE US CURRENT ACCOUNT, ECONOMICS DEPARTMENT WORKING PAPER No. 467, December 2005 The well-known anti-savings biases in the tax code should be removed. Shifting the personal income tax further to a consumption base can also be justified by the predicted efficiency gains that would ensue. But to ensure an improvement in the government balance this should be done preferably by implementing a VAT, rather than by increasing the proliferation of savings incentives. Similarly, the tax base should be broadened to include mortgage interest payments and fringe benefits, especially health insurance premiums FISCAL RELATIONS ACROSS LEVELS OF GOVERNMENT IN THE UNITED STATES, ECONOMICS DEPARTMENT WORKING PAPERS No. 462, November 2005 States should consider replacing it by a more efficient form of business activity taxation, such as the value-added tax discussed below. state governments should consider replacing sales taxes by a broad-based value-added tax. A feasible and efficient replacement for both the corporate income tax and the sales tax would be the VAT. States' efforts to co-ordinate sales tax policies through the adoption of joint definitions and rules of tax administration should be continued, and, assuming successful implementation of the Streamlined Sales and Use Tax Agreement, Congress should authorise states to require remote vendors to collect use tax on their behalf. states should consider replacing both taxes by a VAT. The experience with the Streamlined Sales Tax Project to achieve greater uniformity of sales tax bases and administration might prove helpful in structuring a VAT based on the destination principle. The deductibility of state and local taxes from federal income tax should be abolished, as it raises the inefficiency of the federal income tax due to base narrowing, Presentation of the 2005 OECD Survey of the US economy, Washington DC, 27 October 2005 The exclusion of employer-provided health insurance premiums should be capped it would even make sense to go further still and to replace the corporate income tax by a federal value-added tax. policies to curb greenhouse gas emissions could be reinforced. Acknowledging that voluntary approaches to environmental control typically lack effectiveness. One could mix elements of a domestic cap-and-trade system, as exists for air pollutants, and a carbon tax on all carbon-based energy products. http://www.oecd.org/dataoecd/51/1/35609289.pdf Economic Survey of the United States, 2005 it will also be necessary to bolster revenues by broadening tax bases some increase in revenues will be necessary Reversing the rise in the share of earnings not subject to Social Security tax by increasing the taxable maximum, The deductibility of interest on home equity loans (which are for consumption purposes) should be eliminated. The deductibility of interest on loans for the purchase, construction or improvement of houses should be limited to a much lower threshold and eventually phased out. The exclusion of employer-provided health insurance premiums should be capped. The deductibility on federal tax returns of state and local tax payments and the exemption of interest on public-purpose state and local government debt should be dropped. a federal VAT should be considered. assuming successful implementation of the Streamlined Sales and Use Tax Agreement, Congress should authorise them to require remote vendors to collect use tax on their behalf. As previously noted, the deductibility of state and local taxes from federal income tax should be abolished, Since voluntary approaches to environmental control have been shown to be less effective in general, measures should be taken to stabilise and then reduce greenhouse gas emissions in an economically efficient manner. This could be done by introducing some mixture of a domestic cap-and-trade system, as exists for air pollutants, and a carbon tax on all carbon-based energy products. http://www.oecd.org/dataoecd/4/11/35541272.pdf Economic Survey of the United States 2005: Ensuring fiscal sustainability and budgetary discipline some increase in revenues will be necessary as well Reversing the rise in the share of earnings not subject to Social Security tax by increasing the taxable maximum a federal VAT should be considered. http://www.oecd.org/document/41/0,2340,en_33873108_33873886_35513897_ 1_1_1_1,00.html Country Notes, United States Address over-consumption of health services by promoting cost-conscious decisions (e.g. by rolling back the unlimited tax exclusion of employer-furnished health benefits and through individual health savings accounts). Broaden the tax bases http://www.oecd.org/dataoecd/39/46/34486792.pdf Economic Survey: United States 2004: Ensuring fiscal sustainability and budgetary discipline These measures should …, to the extent revenues have to be raised, broadening the tax base. To the extent that revenues have to be raised, this should be done primarily by broadening the tax base To broaden the tax base of the personal income tax, the deductibility of mortgage interest (regardless of the use of the loan) and of charitable donations should be phased out, as should the unlimited exclusion of employer health insurance plan premia. a further move to a consumption-based tax system through the introduction of a nation-wide value added tax (VAT) should be considered. http://www.oecd.org/document/11/0,2340,en_33873108_33873886_31458443_ 1_1_1_1,00.html Economic Survey of the United States, 2002 In this context, current tax concessions should be reconsidered. The unlimited tax exclusion of employer-furnished health benefits (amounting to about 1 per cent of GDP) encourages the purchase of costly insurance packages. http://www.oecd.org/dataoecd/61/14/2763098.pdf Improving the U.S. tax system, OECD Observer, March 2002 The introduction of value-added tax could offer a way to finance part of the cuts, but that would require co-operation with the states. In any case, the current system of state sales taxes would benefit from an overhaul. It would be a valuable step towards creating a more uniform tax base across the country. http://www.oecdobserver.org/news/fullstory.php/aid/665/Improving_the_U.S._tax _system.html INCREASING EFFICIENCY AND REDUCING COMPLEXITY IN THE TAX SYSTEM IN THE UNITED STATES, ECONOMICS DEPARTMENT WORKING PAPERS No. 313, December 2001 The authority to raise taxation is very widely diffused, giving rise to significant tax competition between local areas that helps limit the burden of taxation. One recent study (Gruber and Saez, 2000), exploits a much larger database and estimates and estimates that the taxable income elasticity for all households with respect to the price of taxable income (i.e. one minus the federal and state income tax rate) is around 0.4 and that it increases across income groups to 0.57 above $75 000 (1992 prices). Moreover, if the researchers had not excluded all those with incomes above $1 000 000, then the elasticity for high-income earners would have risen to 1.42, suggesting that the fall in tax yields from rate cuts would be significantly offset by changed behaviour and perhaps most markedly at high income levels. taxes on petrol are on the low side in the United States. After including a number of other forms of taxation and levies on road-users, the total revenue raised from road-users amounted to $113 billion in 2000. Recognising for the direct cost of capital invested in roads, maintenance and other related costs of running the road system, the revenue raised from road-users slightly exceeds the direct costs of the system. However, once external costs (such as pollution, noise and accident costs) are allowed for, an increase in fuel taxes of around 40 cents per gallon would be justified. Putting the changes onto a permanent basis should be a priority. Any taxation of capital income, however, represents a significant departure from the neutrality of taxation over time, favouring present over future consumption. Substantial efficiency gains could be also made in the personal income tax system through lowering marginal tax rates. States are moving to harmonise their tax bases under the threat of erosion of their tax base stemming from e-commerce, and further progress is needed in this area. It could come through the adoption of a value-added tax rather than a sales tax, with a uniform national structure. Scope exists for taxing other uses of carbon, in view of the concern about the warming effect of a carbon dioxide emissions. For example, a tax of $100 per tonne of carbon might raise $100 billion of revenue. The taxation of businesses, capital gains and capital income more generally should be lowered relative to that of income that is consumed. Such a move would be likely to initially increase the income share of the richest groups in US society but should eventually also increase output and real wages more generally. Phase out mortgage tax and state and local government tax deductions Consider the introduction of a federal value-added tax −Consider higher taxation of carbon-based products Assessment and recommendations A combination of lowering the corporate income tax rate, exempting dividends from personal income tax and sharply reducing capital gains tax rates would move in this direction and could be reinforced by progressive increases in the limits that govern contributions to various tax-exempt saving schemes. A number of deductions, which mainly accrue to high income taxpayers, could be eliminated in order to help lower the taxation of capital income. The current deductibility of mortgage interest (regardless of the use of the loan) and state income taxes are two areas that stand out. The introduction of a value-added tax could possibly offer a way to finance some part of tax reforms advocated above Substantially reducing greenhouse-gas emissions would probably require a new set of initiatives: ideally, a tax on the carbon content of natural gas and coal, the complexity of the income tax system should be reduced, in a revenue-neutral fashion by considering the introduction of a value-added tax and environmental taxation. http://www.oecd.org/dataoecd/7/0/2730405.pdf Economic Survey of the United States, 2001 the complexity of the income tax system should be reduced in a revenue-neutral fashion by considering the introduction of a value-added tax and environmental taxation. higher-income taxpayers appear to be more responsive to movements in taxation than others – raising the possibility that yields from this group might rise if their tax rates fell. Taxation of capital income, rather than the taxation of the consumption from that income, introduces a bias into the tax system. It ensures that the eventual consumption that flows from saving, over time, is less than that obtained by consuming immediately. A number of deductions, which mainly accrue to high income taxpayers, could be eliminated in order to help lower the taxation of capital income. The current deductibility of mortgage interest (regardless of the use of the loan) and state income taxes are two areas that stand out. The introduction of a value-added tax could possibly offer a way to finance some part of tax reforms advocated above Substantially reducing greenhouse-gas emissions would probably require a new set of initiatives: ideally, a tax on the carbon content of natural gas and coal, http://www.oecd.org/dataoecd/47/31/2673115.pdf ENCOURAGING ENVIRONMENTALLY SUSTAINABLE GROWTH IN THE UNITED STATES, ECONOMICS DEPARTMENT WORKING PAPERS No. 278, January 2001 OECD estimates suggest that a tax-based solution would require a carbon tax of somewhere between $10 and $250 per tonne (1995 prices), depending on the degree of international trading (the lower figure for full worldwide trading, the latter with no trading at all), corresponding to between about 3 and 70 cents on a gallon of gasoline and between $8 and $210 on a tonne of oil delivered to power stations (whose average prices in 1999 were around $1.20 per gallon – 32 cents per litre – and $90 per tonne respectively). An obvious candidate for beginning to tackle some of these problems would be a fertiliser tax – a conclusion drawn, for example, in OECD (1996) – or, better, an excess nutrient tax, the increase in the gasoline tax needed to meet the Kyoto target may not be very large (though the proportionate increase in oil and coal prices would be considerable). http://www.oecd.org/dataoecd/38/41/1888654.pdf CONCLUSIONS AND RECOMMENDATIONS* Progress in integrating environmental concerns into tax policy has been mixed, with rate differentiation or deductions (e.g. tax deductions for business purchase of sport utility vehicles and for home mortgage interest) sometimes inconsistent with environmental goals. http://www.oecd.org/dataoecd/6/28/35919474.pdf
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