Daily Deduction

from the Tax Policy Center

EPA Regulations, International Taxation and Hitting the Sweet Spot

By :: June 3rd, 2014

Will the EPA’s proposal to curb greenhouse gas emissions allow state-based carbon taxes? The new regulations would give states broad flexibility to require power plants to meet tough emissions standards, including creating new cap-and-trade systems. But the 645-page proposal never uses the word “tax.”

The OECD wants to improve international taxation. The Organization for Economic Cooperation and Development concludes its two-day conference on its new international taxation initiatives to address base erosion and profit shifting. Topics include transfer pricing, intangibles, country-by-country reporting, the digital economy, treaty abuse, hybrids, the Foreign Account Tax Compliance Act, and a common standard for automatic exchange of information. IRS Commissioner John Koskinen delivers the keynote address this afternoon.

But, Republicans and some business leaders don’t want foreign governments to raise taxes on US corporations. Bloomberg reports on Senator Orrin Hatch’s and House Ways and Means Chair Dave Camp’s concern that either the OECD or individual countries might change their tax rules. They, as well as the Business Roundtable, a US association of corporate chief executives, fear some changes might raise taxes of US-based multinationals by curbing tax preferences.

Meanwhile, overseas banks are coming forward to counter individuals’ tax evasion. In nearly 70 countries, 77,000 foreign banks have agreed to share information about U.S. account holders under the Foreign Account Tax Compliance Act, according to the Treasury Department.

And now for something completely different: a tax on calories? New research suggests a tax on calories, versus ounces of liquid, might curb the consumption of sugary drinks. Using a consumer-demand model based on supermarket scanner data, researchers from the Research Triangle Institute predict that a “.04 cent per-calorie tax on sugar-sweetened beverages would reduce consumption by 5,800 calories per person annually and could do so at a lower cost to consumers than an ounce-based tax.” The study, funded in part by the Robert Wood Johnson Foundation, did not model whether stores would absorb any of the tax or pass on costs to consumers.

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