Charts of the Week: Ideas for raising revenue

Figure 1: US Corporate profits and corporate tax revenues, as a share of GDP, 1980-2017

The Hamilton Project at Brookings has produced a new policy book containing a series of ideas of how the United States can raise more revenue at a time of declining tax receipts and rising needs. Here are a few charts from that research.

A proposal for taxing multinational companies

Figure 1: US Corporate profits and corporate tax revenues, as a share of GDP, 1980-2017

Kimberly Clausing, in her contribution to the new policy book, observes that as corporate after-tax profits have soared as a share of GDP, tax revenues are flat due in part to “the profit-shifting abilities of U.S. multinational companies.” She offers a proposal for “rebalancing of U.S. international tax policy priorities” by, among other policies, addressing this profit shifting and offshoring.

Raising revenue with a progressive value added tax

Figure 2: OECD tax revenue as a percent of GDP 1965-2016In his chapter for the Hamilton Project volume, William Gale explains that “the future fiscal and economic health of the United States depends on the federal government’s ability to increase revenues above their current, historically low rate.” To address this problem, Gale proposes a “goods and service” tax, aka a value-added tax (VAT), a kind of tax used in many OECD countries without dampening overall tax revenue. Gale argues that a VAT “can raise revenue in a relatively efficient, relatively progressive, and administrable manner.”

The economics of federal tax policy

Figure 1: US federal revenue and spending as a percent of potential GDP, 1950-2018

In a third chapter from the Hamilton Project volume, Emily Moss, Ryan Nunn, and Jay Shambaugh note that “the federal government faces increasing revenue needs given the aging of the population and the need to address emerging challenges.” They offer a framework to look at various tax policies and their effects on growth and economic inequality. “The United States remains a relatively lightly taxed economy,” they write, ”and projections are that tax revenue will substantially lag spending for the foreseeable future.”

For more, visit the Hamilton Project’s new policy book, “Tackling the Tax Code: Efficient and Equitable Ways to Raise Revenue.”