DOCSLIB.ORG

Corporate Tax Cut Is Credit Positive, While Effects of Other Provisions Vary by Sector

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Corporate Tax Cut Is Credit Positive, While Effects of Other Provisions Vary by Sector CROSS-SECTOR SECTOR IN-DEPTH Tax Reform – US 21 December 2017 Corporate tax cut is credit positive, while effects of other provisions vary by sector TABLE OF CONTENTS Summary Economic impact 2 A sharply reduced statutory corporate tax rate is the centerpiece of the wide-ranging tax US sovereign 4 legislation that the US Congress passed on December 20. The cut to 21% from 35% will Non-financial corporates 5 boost corporate cash flow, a broad credit positive. But the sweeping tax legislation makes Multinationals 6 many changes to the tax code, some of which will be credit negative for certain sectors. Utilities 6 Financial institutions 7 » US sovereign. The legislation is credit negative owing to a $1.5 trillion deficit impact over Public finance 9 10 years that will make federal debt reduction even more challenging. The tax cuts will Structured finance 10 contribute only modestly to aggregate economic growth, in the range of one-tenths to two-tenths of a percent of GDP, due mostly to higher household consumption rather than an increase in business investment. Analyst Contacts » Non-financial companies. The corporate tax rate cut and full upfront deductibility of Anne Van Praagh +1.212.553.3744 capital spending will outweigh the cost of a limitation on interest deductibility for all but MD-Gbl Strategy & a handful of investment-grade US companies. Limits on interest deductibility will leave Research [email protected] many highly leveraged companies worse off. Rebecca Karnovitz +1.212.553.1054 » Utilities. The legislation is credit negative for investor-owned utilities because a lower tax AVP-Analyst rate will reduce the difference between the amount that utilities collect from rate payers [email protected] to cover taxes and their payments to tax authorities, reducing cash flow. Sarah Carlson +44.20.7772.5348 Senior Vice President » Financial institutions. A reduced corporate tax rate will lead to a net reduction in [email protected] banks’ tax liabilities and an associated improvement in profitability, which will mostly Christina Padgett +1.212.553.4164 benefit shareholders. Write-downs in the value of deferred tax assets could have some Senior Vice President modest impact on banks' reported capital ratios. The tax bill is net positive for most asset [email protected] management firms, with potentially greater benefit for those with foreign earnings. It is M. Celina Vansetti +1.212.553.4845 also a net credit positive for insurers, but impacts are company specific. MD-Banking [email protected] » Public finance. The new $10,000 limit on state and local tax deductions will blunt the Jody Shenn +1.212.553.1612 effect of lower federal rates for many taxpayers; reduce governments’ financial flexibility VP-Senior Analyst by increasing anti-tax sentiment; widen tax rate disparities among states and metro areas; [email protected] and, in conjunction with a higher standard deduction and a limit on the mortgage interest CLIENT SERVICES deduction, reduce the tax incentive for home ownership. Americas 1-212-553-1653 » Structured finance. Generally lower tax obligations for US corporations and individuals Asia Pacific 852-3551-3077 will support debt service capacity for both groups of obligors; however, the legislation also will likely result in credit negative tax increases on a subset of obligors, and create risks in Japan 81-3-5408-4100 certain sectors, such as via negative effects on home prices. EMEA 44-20-7772-5454 MOODY'S INVESTORS SERVICE CROSS-SECTOR Tax bill will have a modest impact on growth, but will support equity prices We expect the US economy to grow by around 2%-2.5% in 2018-19, with some potential upside suggested by the recent strong performance. These forecasts incorporate our view that the contribution of the tax cuts to aggregate economic growth will be modest, in the range of one-tenth to two-tenths of a percent. The marginally stronger growth will be driven mainly by somewhat higher household consumption resulting from individual tax cuts. We do not believe that the corporate tax cuts will meaningfully increase business investment spending. The tax changes will be modestly positive for stock prices, given the resulting higher after-tax corporate earnings. We believe the impact of the tax cuts on economic growth is likely to be modest for the following key reasons. First, while corporate tax cuts could raise business investment on the margin, nonfinancial corporates that have held back investment in this low interest rate environment may not plow back the windfall from a lower tax rate into investment, instead choosing to either pay down debt or engage in share buybacks. Second, the income tax cuts will be proportionally larger for higher-income households, which have a relatively lower propensity to spend and therefore will be more likely to save a large part of the cuts. Third, any government spending cuts undertaken to pay for the tax cuts could actually lower growth. This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history. 2 21 December 2017 Tax Reform – US: Corporate tax cut is credit positive, while effects of other provisions vary by sector MOODY'S INVESTORS SERVICE CROSS-SECTOR Exhibit 1 Income tax cuts proportionally larger for higher-income households; effects fade after 10 years for all but top earners due to sunset clauses 2018 2027 Change in after-tax income (%) 3.5 3 2.5 2 1.5 1 0.5 0 -0.5 -1 Lowest quintile Second quintile Middle quintile Fourth quintile Top quintile Note: Excludes effects of repealing the Affordable Care Act's individual mandate Source: Urban-Brookings Tax Policy Center We expect that with above-trend growth and full employment, in part related to the tax cuts, inflation measures will strengthen over time, eventually stabilizing around the US Federal Reserve’s inflation target of 2%. This momentum will bolster the Fed's confidence to raise the fed funds rate two to three times in 2018. The higher debt trajectory resulting from any unfunded element of the tax cuts is likely to push interest rates up somewhat in the medium term. While we expect that the 10-year yield will gradually rise to around 3% by the end of 2018, similar to our pre-tax-cut view, we forecast that it will be about 15 basis points higher than previous estimates by 2022, at slightly above 4%. Should the tax cuts have a larger positive impact on growth than we expect, consequent inflationary pressures would likely contribute to a faster withdrawal of monetary policy accommodation. All else equal, the tax bill will have a regionally uneven effect on the housing market in the short term. Since the tax law reduces the value of the mortgage interest deduction and property tax deductions, house price growth may slow in areas with high property taxes. Overall, however, the positive impact of higher household after-tax income and higher wealth effect from higher stock prices on housing demand should offset any negative impact of smaller property-related deductions on the housing market. Exhibit 2 Impact of the tax cuts Corporations most likely to increase shareholder value, households to save and the federal government to increase borrowing Note: We assume that some spending cuts will follow this legislation to offset some of the reduced revenue. Source: Moody's Investors Service 3 21 December 2017 Tax Reform – US: Corporate tax cut is credit positive, while effects of other provisions vary by sector MOODY'S INVESTORS SERVICE CROSS-SECTOR Tax cuts will increase deficits, adding to an already rising sovereign debt burden On balance, the new legislation is negative for the credit strength of the US sovereign (Aaa stable). Given the modest growth impact, we do not believe that the tax reform will be self-financing. We also think it is unlikely that tax cuts will be offset by equivalent cuts to spending in the near term. At only 3.2% of GDP in 2017, potential reductions in discretionary spending would be too small to finance the planned cuts. And mandatory spending largely consists of entitlements, where cuts will be politically challenging, particularly given the upcoming midterm elections and the 51-49 split of the Senate as of the beginning of 2018. The challenge of financing the tax cuts will be compounded if, as typically has been the case in the past, some of the temporary tax cuts, particularly those on household incomes, are extended by a future Congress. Absent other measures to finance the tax cuts, we believe that the deficit will rise by at least $1.5 trillion over the coming 10 years on a dynamic basis. Our estimate of the cost of the bill assumes that some of the temporary tax cuts will be extended. Higher deficits will exacerbate pressures on the federal government’s finances that are already likely to arise in the coming years from the rising cost of entitlements. Over the longer term, unless the course of fiscal policy is changed through revenue-increasing or expense-reducing measures (and, for the reasons noted above, both are likely to be needed to meaningfully reduce the debt burden), we believe that the federal government’s debt-to-GDP ratio will rise by more than 25 percentage points over the next decade, to above 100%. Combined with rising interest rates, debt affordability will weaken significantly. Worsening debt metrics will accentuate the importance for the US’ credit profile of its extraordinarily high economic strength, and the unrivalled capacity to issue debt conferred on the US government by the benchmark status of US Treasury instruments and the reserve status of the US dollar.
Load more

Recommended publications
  • Creating Market Incentives for Greener Products Policy Manual for Eastern Partnership Countries
    Creating Market Incentives for Greener Products Policy Manual for Eastern Partnership Countries Creating Incentives for Greener Products Policy Manual for Eastern Partnership Countries 2014 About the OECD The OECD is a unique forum where governments work together to address the economic, social and environmental challenges of globalisation. The OECD is also at the forefront of efforts to understand and to help governments respond to new developments and concerns, such as corporate governance, the information economy and the challenges of an ageing population. The Organisation provides a setting where governments can compare policy experiences, seek answers to common problems, identify good practice and work to co-ordinate domestic and international policies. The OECD member countries are: Australia, Austria, Belgium, Canada, Chile, the Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Iceland, Ireland, Israel, Italy, Japan, Korea, Luxembourg, Mexico, the Netherlands, New Zealand, Norway, Poland, Portugal, the Slovak Republic, Slovenia, Spain, Sweden, Switzerland, Turkey, the United Kingdom and the United States. The European Union takes part in the work of the OECD. Since the 1990s, the OECD Task Force for the Implementation of the Environmental Action Programme (the EAP Task Force) has been supporting countries of Eastern Europe, Caucasus and Central Asia to reconcile their environment and economic goals. About the EaP GREEN programme The “Greening Economies in the European Union’s Eastern Neighbourhood” (EaP GREEN) programme aims to support the six Eastern Partnership countries to move towards green economy by decoupling economic growth from environmental degradation and resource depletion. The six EaP countries are: Armenia, Azerbaijan, Belarus, Georgia, Republic of Moldova and Ukraine.
    [Show full text]
  • SHOULD WE TAX UNHEALTHY FOODS and DRINKS? Donald Marron, Maeve Gearing, and John Iselin December 2015
    SHOULD WE TAX UNHEALTHY FOODS AND DRINKS? Donald Marron, Maeve Gearing, and John Iselin December 2015 Donald Marron is director of economic policy initiatives and Institute fellow at the Urban Institute, Maeve Gearing is a research associate at the Urban Institute, and John Iselin is a research assistant at the Urban-Brookings Tax Policy Center. The authors thank Laudan Aron, Kyle Caswell, Philip Cook, Stan Dorn, Lisa Dubay, William Gale, Genevieve Kenney, Adele Morris, Eric Toder, and Elaine Waxman for helpful comments and conversations; Joseph Rosenberg for running the Tax Policy Center model; Cindy Zheng for research assistance; Elizabeth Forney for editing; and Joanna Teitelbaum for formatting. This report was funded by the Laura and John Arnold Foundation. We thank our funders, who make it possible for Urban to advance its mission. The views expressed are those of the authors and should not be attributed to our funders, the Urban-Brookings Tax Policy Center, the Urban Institute, or its trustees. Funders do not determine our research findings or the insights and recommendations of our experts. For more information on our funding principles, go to urban.org/support. TAX POLICY CENTER | URBAN INSTITUTE & BROOKINGS INSTITUTION EXECUTIVE SUMMARY A healthy diet is essential to a long and vibrant life. But there is increasing evidence that our diets are not as healthy as we would like. Obesity, diabetes, hypertension, and other conditions linked to what we eat and drink are major challenges globally. By some estimates, obesity alone may be responsible for almost 3 million deaths each year and some $2 trillion in medical costs and lost productivity (Dobbs et al.
    [Show full text]
  • Nonprofit Analysis of the Final Tax Bill
    Tax Cuts and Jobs Act, H.R. 1 Nonprofit Analysis of the Final Tax Law* UPDATED April 5, 2018 ISSUE LEGISLATIVE CHANGE IMPACT ON CHARITABLE NONPROFITS • Preserves nonprofit nonpartisanship by • The House-passed tax bill and several leaving longstanding law intact. bills pending in Congress would repeal or • House-passed version would have weaken the Johnson Amendment. weakened existing law, which for 60+ • More than 5,600 organizations JOHNSON years has protected charitable nonprofits, nationwide, along with thousands of AMENDMENT houses of worship, and foundations so religious leaders, faith organizations, law (NONPROFIT they can work in communities free from enforcement officials, and the vast NONPARTISANSHIP) partisan pressures, divisions, and majority of the general public oppose interference. weakening the 1954 Johnson Amendment. • Visit www.GiveVoice.org for more information. • Increases the standard deduction for • As a result of the change, the charitable individuals (to $12,000), couples (to deduction would be out of reach of more $24,000), and heads of households (to than 87% of taxpayers. The Joint $18,000). Committee on Taxation (JCT) estimates • Raises the limit on cash donations for that itemized deductions will drop by $95 those who itemize deductions to 60% of billion in 2018. Not all of this would adjusted gross income (AGI), up from the disappear; the change is estimated to STANDARD current 50% of AGI. shrink giving to the work of charitable DEDUCTION AND • Repeals the “Pease limitation” on nonprofits by $13 billion or more each INCENTIVES FOR itemized deductions that limits year. Estimates are that this drop in giving would cost 220,000 to 264,000 nonprofit CHARITABLE GIVING deductions for upper-income individuals.
    [Show full text]
  • Sugar-Sweetened Beverage Consumption and Taxation
    URBAN GOVERNANCE FOR NUTRITION PROGRAMME FACTSHEET Sugar-Sweetened Beverage Consumption and Taxation Consumption of sugar-sweetened beverages (SSBs) is rising rapidly, food sugar urban environment especiallytaxes in urban areasnutrition in low- and middle-income countries (LMICs). Often this change can be observed as part of the nutrition transition, which is particularly pronounced in urban areas in LMICs. The nutrition transition describes a shift from more traditional diets rich in unpro- cessed cereals, starchy staples and fibre to an increased consumption of processed foods with often higher shares of sugar, salt and fat, including SSBs. SSB consumption increases the risk for overweight and obesity, which are linked to a variety of non-communicable diseases (NCDs), including diabetes, cardiovascular diseases and certain types of cancer. One policy tool targeted at lessening the consumption of SSBs is a SSB tax, which increases the price of sugary drinks in a given area, which could be a single city, states or a country. Evidence on the effectiveness of this tax in changing consumption patterns is encour- aging and experiences on the implementation of the tax can be used to inform policy makers. Sugar-sweetened beverages (SSBs) are beverages that are sweetened with all types of sugar including syrups, honey and other caloric sweeten- ers. These drinks include, among others, carbonates, fruit drinks, sports drinks, energy drinks, flavoured water or milk, and coffee and tea bever- ages that contain free sugars. Other terms often used to refer to SSBs are soft drinks and sodas (1,2). Global consumption of sugar-sweetened beverages SSBs are widely available and are consumed across all parts of the world.
    [Show full text]
  • FINANCE Offshore Finance.Pdf
    This page intentionally left blank OFFSHORE FINANCE It is estimated that up to 60 per cent of the world’s money may be located oVshore, where half of all financial transactions are said to take place. Meanwhile, there is a perception that secrecy about oVshore is encouraged to obfuscate tax evasion and money laundering. Depending upon the criteria used to identify them, there are between forty and eighty oVshore finance centres spread around the world. The tax rules that apply in these jurisdictions are determined by the jurisdictions themselves and often are more benign than comparative rules that apply in the larger financial centres globally. This gives rise to potential for the development of tax mitigation strategies. McCann provides a detailed analysis of the global oVshore environment, outlining the extent of the information available and how that information might be used in assessing the quality of individual jurisdictions, as well as examining whether some of the perceptions about ‘OVshore’ are valid. He analyses the ongoing work of what have become known as the ‘standard setters’ – including the Financial Stability Forum, the Financial Action Task Force, the International Monetary Fund, the World Bank and the Organization for Economic Co-operation and Development. The book also oVers some suggestions as to what the future might hold for oVshore finance. HILTON Mc CANN was the Acting Chief Executive of the Financial Services Commission, Mauritius. He has held senior positions in the respective regulatory authorities in the Isle of Man, Malta and Mauritius. Having trained as a banker, he began his regulatory career supervising banks in the Isle of Man.
    [Show full text]
  • The Effects of the 2003 Dividend Tax Cut†
    American Economic Review 2015, 105(12): 3531–3563 http://dx.doi.org/10.1257/aer.20130098 Capital Tax Reform and the Real Economy: The Effects of the 2003 Dividend Tax Cut† By Danny Yagan* This paper tests whether the 2003 dividend tax cut—one of the largest reforms ever to a US capital tax rate—stimulated corporate investment and increased labor earnings, using a quasi-experimental design and US corporate tax returns from years 1996–2008. I estimate that the tax cut caused zero change in corporate investment and employee compensation. Economically, the statistical precision challenges leading estimates of the cost-of-capital elasticity of investment, or undermines models in which dividend tax reforms affect the cost of capital. Either way, it may be difficult to implement an alternative dividend tax cut that has substantially larger near- term effects. JEL C72, C78, C91 ( ) The Jobs and Growth Tax Relief Reconciliation Act of 2003 reduced the top fed- eral tax rate on individual dividend income in the United States from 38.6 percent to 15 percent. The president projected that the tax cut would provide “near-term sup- port to investment” and “capital to build factories, to buy equipment, hire more peo- ple.”1 The underlying rationale finds support in economics: traditional models imply that dividend tax cuts substantially reduce firms’ cost of capital Harberger 1962, ( 1966; Feldstein 1970; Poterba and Summers 1985 , and investment appears highly ) responsive to the cost of capital Hall and Jorgenson 1967; Cummins, Hassett, and ( Hubbard 1994; Caballero, Engel, and Haltiwanger 1995 . Similar arguments moti- ) vate ongoing proposals to use capital tax reforms to increase near-term output Ryan ( 2011, 2012; Hubbard et al.
    [Show full text]
  • Tax Notes International Article It's Time to Update The
    ® Analysts does not claim copyright in any public domain or third party content. Tax All rights reserved. Analysts. Tax © 2019 taxnotes international Volume 96, Number 8 ■ November 25, 2019 It’s Time to Update the Laffer Curve For the 21st Century by George L. Salis Reprinted from Tax Notes Internaonal, November 25, 2019, p. 713 For more Tax Notes® International content, please visit www.taxnotes.com. © 2019 Tax Analysts. All rights reserved. Analysts does not claim copyright in any public domain or third party content. VIEWPOINT tax notes international® It’s Time to Update the Laffer Curve for the 21st Century by George L. Salis economic theory could use a redesign for our George L. Salis is the principal economist modern global digital economy. In fact, most economic theories and models evolve in how and tax policy adviser they’re framed and/or applied over time. As at Vertex Inc. and is based in King of economist Dani Rodrik notes in his book, Prussia, Pennsylvania. Economics Rules: The Rights and Wrongs of the Dismal Science, “older models remain useful: we In this article, the add to them.” author discusses the necessity of updating Additions to the theory could be important to the applicability of the business and tax executives, given how the Laffer Laffer curve theory to curve and the Tax Cuts and Jobs Act it the modern global theoretically helped create continue to produce digital economy. economic, policy, and trade ripple effects around the world. The influence on economic cycles and It’s staggering to think that notes scribbled on national debt levels in turn have major a restaurant napkin can transform into a implications for tax policy decisions, as well as fundamental notion that has for decades served as strategic tax planning activities in the (possibly a rationalization for major tax cuts.
    [Show full text]
  • Assessing the Fdi Response to Tax Reform and Tax-Planning
    ASSESSING THE FDI RESPONSE TO TAX REFORM AND TAX-PLANNING W. Steven Clark* ([email protected]) Abstract This paper considers the use of ‘forward-looking’ effective tax rates to estimate the impact of corporate tax reform on FDI flows, and signals the need to address increasingly common strategies of multinationals to minimize host and home country tax, when attempting to model representative financing and repatriation structures. Average effective tax rate (AETR) and marginal effective tax rate (METR) formulae are developed that incorporate various corporate tax-planning strategies, and illustrative results are derived to shed light on possible implications of moving away from standard financing and repatriation assumptions. The results suggest that AETRs/METRs based on standard assumptions, such as used in Taxing Profits in a Global Economy OECD (1991), need to be reconsidered, as effective tax rates cmay be significantly lower in certain cases, when tax-planning is accounted for. A central question is whether tax-planning is taken into account by investors when making investment decisions. ________________________________________________________________________________ * Head, Horizontal Programmes Unit, OECD Centre for Tax Policy and Administration (CTPA). The views expressed in this paper are those of the author, and do not necessarily reflect the views of the OECD or its Member countries. 2 A. Introduction This paper considers the use of ‘forward-looking’ effective tax rates (ETRs) to estimate the impact of corporate tax reform on FDI flows, and signals the need to address increasingly common strategies used by multinationals to minimize host and home country tax when attempting to model representative financing and repatriation structures.1 Average effective tax rate (AETR) and marginal effective tax rate (METR) formulae are developed that incorporate various corporate tax-planning strategies, and illustrative results are derived to shed light on possible effects when moving away from standard financing and repatriation assumptions.
    [Show full text]
  • 18000 Tax Cuts
    LETTER FROM THE U.S. TRADE AMBASSADOR 18,000 WAYS TPP HELPS AMERICAN WORKERS, FARMERS & BUSINESSES WIN When the rules are fair, Americans can out- manufacturers make, American farmers grow, and compete anyone in the world. That simple American innovators create. yet powerful idea is at the heart of the Trans- In contrast, our workers face a multitude of bar- Pacific Partnership (TPP), a next-generation riers to doing business overseas. When our exporters work to sell Made-in-America goods to other coun- trade agreement that will give our workers, tries, they’re burdened with tariffs over twice as high farmers, and businesses a fair shot in the on average. American manufactured goods currently fastest-growing region of the world and face tariffs of up to 100% on certain goods in TPP mar- support more good jobs here at home. kets, and American agriculture exports face tariffs over 700% on some products. Our workers are among the To level the playing field, TPP eliminates thousands of most productive in the world, but in cases like these, taxes—in the form of tariffs—that are applied to every- the deck is stacked against them. thing from Washington apples, to Texas beef, to Sili- These imbalances favor foreign products at the con Valley software. In fact, TPP is the largest tax cut expense of American exports. In Malaysia, for exam- on American exports in a generation, slashing near- ple, American motor vehicles face tariffs of 30%, while ly 18,000 individual taxes on the products American motor vehicles from Japan, Turkey, and elsewhere face no tariffs.
    [Show full text]
  • Comparing the Trump & Ryan Tax Plans
    COMPARING THE TRUMP & RYAN TAX PLANS President-elect Donald Trump and House Speaker Paul Ryan have tax plans that will cost trillions of dollars, give huge tax breaks to corporations and the wealthy, and to pay for these tax cuts either explode the deficit or require deep and painful cuts to public services. A detailed comparison of their plans is below. Unless otherwise sourced this way, all 10-year revenue estimates are from the Tax Policy Center’s “An Analysis of Donald Trump’s Revised Tax Plan” (issued Oct. 18, 2016) and “An Analysis of the House GOP Tax Plan” (issued Sept. 16, 2016). TRUMP RYAN Total Revenue Lost Loses $6.2 trillion over 10 years. Increases the Loses $3.1 trillion over 10 years. Increases the & Overall Effects deficit by $7.1 trillion. deficit by $3.6 trillion. Top 0.1% of households get a $1.1 million tax cut Top 0.1% of households get a $1.3 million tax cut each year, on average, and 24% of all tax cuts. each year, on average, and 47% of all tax cuts. Top 1% get a $215,000 tax cut each year, on Top 1% get a $213,000 tax cut each year, on average, and nearly half (47%) of all tax cuts. average, and 99% of all tax cuts by 2025. Middle-income families get a $1,000 tax cut; bottom Middle-income families get a $260 tax cut; bottom 20% get a $110 tax cut. 20% get a $50 tax cut. Taxing Corporations: Slashes the corporate tax rate by 60%—from 35% Slashes the corporate tax rate by more than 40%— General Tax Rates to 15%, which loses $2.4 trillion.
    [Show full text]
  • A Legal & Practical Guide for Designing Sugary Drink Taxes
    A Legal and Practical Guide for Designing Sugary Drink Taxes Second Edition Cola SPORT ENERGY Contents Introduction 3 Why Tax Sugary Drinks? 5 Legal Authority 7 Preemption 8 Sugary Drink Tax Design 9 What Type of Tax to Pass 10 Defining the Tax Base 11 Which Beverages Are Subject to the Tax? 14 Setting the Tax Rate 16 Dedication of Revenues 17 Ballot Measure Versus Legislation 20 Implementing the Tax 21 Key Implementation Steps 21 Tax Education and Community Outreach Activities 22 Potential Challenges to Tax Efforts 23 Conclusion 25 Appendix I: Model Findings 26 Appendix II: Sample and Model Ordinance Language 31 Notes 36 TABLES Table 1: Sugary Drink Taxes in the United States as of November 30, 2018 6 Table 2: Comparing Sugary Drink Tax Bases 13 Table 3: Product Price Changes for Volume- and Sugar-Based Taxes 16 Table 4: Activities and Programs Funded by Sugary Drink Taxes 17 2 A Legal and Practical Guide for Designing Sugary Drink Taxes | changelabsolutions.org | healthyfoodamerica.org Introduction Sugary drinks are the number one source of added In the last few years, one strategy has received sugars in our diet, representing almost half of growing support from both the public and all added sugars consumed in the United States.1 policymakers: taxing sugary drinks to both reduce These added sugars are a major contributor to consumption and raise revenues that can be the country’s high rates of heart disease, type 2 invested in promoting healthier communities. diabetes, obesity, poor oral health, and other chronic Recently enacted sugary
    [Show full text]
  • Macroeconomic Analysis of a 10 Percent Cut in Income Tax Rates
    Technical Paper Series Congressional Budget Office Washington, D.C. Macroeconomic Analysis of a 10 Percent Cut in Income Tax Rates Robert Dennis, Douglas Hamilton, Robert Arnold, Ufuk Demiroglu, Tracy Foertsch, Mark Lasky, Shinichi Nishiyama, Larry Ozanne, John Peterson, Frank Russek, John Sturrock, and David Weiner May 2004 2004-07 Technical papers in this series are preliminary and are circulated to stimulate discussion and critical comment. These papers are not subject to CBO’s formal review and editing processes. The analysis and conclusions expressed in them are those of the authors and should not be interpreted as those of the Congressional Budget Office. References in publications should be cleared with the authors. Papers in this series can be obtained at www.cbo.gov (select Publications and then Technical Papers). Abstract This paper explores the effects of a simple policy change—a 10 percent tax cut—to shed light on the different models CBO uses to examine the macroeconomic effects of policy changes. Most of the models predict that such a simple tax cut will increase GDP and therefore that the revenue loss from the tax cut will be smaller than the conventional estimate predicts over the first 10 years. None of the models predict that as much as 25 percent of the conventional cost could be offset, however. This paper is an expanded version of a paper presented at the National Tax Association’s annual conference on November 14, 2003. Introduction The Congressional Budget Office (CBO) has for many years informed Congress of the economic implications of its fiscal policy decisions.
    [Show full text]