Daily Deduction Optimism, Caution, Reductions and Compliance
Renu Zaretsky
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The President’s Budget comes out today. Leaks over the weekend gave us hints of what the long-delayed fiscal plan will include. The Trump Administration will project that deregulation and tax cuts will keep the economy growing at an average annual rate of 3 percent for the next decade, far faster than  many independent  forecasters predict. The Wall Street Journal reports (paywall) that the White House will forecast growth of 3.2 percent this year. That’s almost a full percentage point higher than the 2.3 percent CBO projected in January. Democrats  already have called the president’s plan a “nonstarter,” given its broad domestic spending cuts, large increases for the Pentagon, and, yes, another $8.6 billion in funding for a southern border wall.

Utah’s House Republicans want to vote on tax changes before deciding how to spend the state’s surplus. They’re advancing a plan to withhold $400 million of the state’s $1.1 billion budget surplus until the chamber takes up a tax bill in a special session later this year. The House Budget Committee chairman said the lawmakers want to “make sure if tax reform doesn't pass, we have the money to get us by.”

In Massachusetts, tax collections are up. The state’s Department of Revenue collected over $1.4 billion in February, up 13 percent from February, 2018. The state collected less than expected in December and January, causing concern over whether it could meet budget obligations in the current fiscal year. Revenues overall still are running slightly below projections. 

How might a domestic carbon tax reduce US carbon emissions? Gilbert Metcalf of Tufts University, in the spring 2019 edition of Brookings Papers on Economic Activity, describes the role a domestic carbon tax could play in reducing US emissions. He argues it is better than alternatives though still not sufficient to substantially reduce greenhouse gases. He reports that  British Columbia’s broad-based carbon tax has reduced emissions by between 5 and 8 percent since the tax took effect a decade ago.

How should metro Los Angeles best handle traffic congestion pricing? Michael Hiltzik of the The Los Angeles Times  describes the Metropolitan Transit Authority’s suggested new efforts to discourage driving. Options include: a per-mile tax on autos, a fee to enter certain neighborhoods, and an expansion of toll lanes. The MTA also will consider a surcharge on ride-sharing services.

Why don’t Americans cheat on their taxes? The Atlantic considers the question and reports that the US voluntary compliance rate (VCR) has ranged between 81 and 84 percent in recent decades, higher than other countries. Why? US tax rates are lower and the US does not have a booming shadow economy, or black market. For now, tax morale in the US (social norms, democratic values, civic pride, transparent government spending, and trust in leadership and fellow citizens) remains relatively high.

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