A cherished equation of conservative economic thought — lower taxes equals higher growth — took a beating from a couple of sources this week.

On Monday, Michael Linden, director of tax and budget policy at American Progress, published an analysis of marginal tax rates at the Federal level over the past 60 years, concluding that growth was actually fastest in years when the top rates were highest. Go figure.

Then today comes a report from a team of economists at Penn State that looks at the same issue at the state level. You would expect that, other things being equal, states with lower taxes would achieve better economic performance, right? Nope. Turns out there’s no statistical correlation, according to Penn State prof Stephan Goetz, one of the authors of the study. Goetz speculates that low-tax states may skimp on services that businesses happen to find pretty useful, such as road repairs and education: “It’s essentially a case of you get what you pay for. You can’t attract businesses if you can’t provide needed public services.” more

When I talked to Jeff Westphal, president and CEO of tax software firm Vertex Inc., recently he pointed to hyper-regulation as the most dominant trend in tax worldwide as nations struggle to resolve the sovereign debt crisis without explicitly raising tax rates. Here are four more key trends he sees dominating the global tax outlook for the next few years:

1. The convergence of finance and tax. CFOs and tax directors are working more closely together, driven by endlessly escalating transparency requirements for U.S. publicly traded multinationals. “Tax has been like a black box, but this regulatory environment is causing more CFOs to say ‘I’ve got to know what’s inside the box, and I have to know that it’s as tight as a drum, just like the rest of our finance operation,’” Westphal notes. more

Keeping on top of the domestic tax code is a tough task for U.S.-based companies, but the challenges are massively greater for organizations that must also cope with developing regulations in overseas jurisdictions. China looms large many companies’ expansion strategies, and Jeff Westphal, president and CEO of global tax technology firm Vertex Inc., recently returned from a tour of that country, where he met with business leaders and service providers with a view to getting a deeper feel for the markets, the tax regime and the reality of doing business today in China. I talked with Westphal about China’s developing tax structures and what he sees as an ongoing trend of “hyper-regulation” by governments worldwide. more

Quick question for CFOs: Which is the bigger compliance challenge for your tax department — federal or state/local taxes?

If you answered federal, you may be surprised to learn you’re in the minority. more

A BizTaxBuzz guest post by Stephen O’Connell, partner, and Jeff Malo, director, with business and tax advisory firm WTP Advisors. (See my previous blog on the new Schedule UTP disclosures.)

It’s inevitable that some companies will face assessments as a result of the disclosure requirements now imposed by Schedule UTP. For these taxpayers, the question is not how to avoid potential liabilities, but how to mitigate their impact.

Understanding your payment history and interest profile may reveal significant opportunities to offset at least a portion of any liabilities that you anticipate as a result of a Schedule UTP disclosure.

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