Donald Trump is not only President-elect, but he is also the hands-down winner of Tax Vox’s Lump of Coal Award for the worst tax policy ideas of 2016. Presidential election years are always a bonanza of bad ideas. And, sadly, this one was no exception. Still, our job is to pick the Terrible Ten. Here they are, starting with Number 10.
10. The Tax That Must Not Be Named. Several influential Republicans, including House Speaker Paul Ryan and presidential hopefuls Marco Rubio, Ted Cruz, and Jeb Bush all proposed business cash flow taxes this year. These represent serious tax reform. But they all are versions of a Value-Added Tax and, in certain precincts of the GOP, VATs are verboten. So backers such as Cruz and Ryan loudly insisted their VATs are not what they obviously are. By doing so, they dismally failed the proverbial duck test.
9. Impeaching IRS Commissioner John Koskinen. The House Freedom Caucus wanted to fire Koskinen for his alleged role in an overblown scandal that occurred long before he became commissioner. Fortunately, Congress buried the idea for 2016, and lawmakers are likely to be much too busy in 2017 to revive the effort.
8. The Alzheimer’s Boondoggle. Two congressmen got the bright idea that profits from the sale of Alzheimer’s drugs should be exempt from the corporate income tax. Alzheimer’s is a terrible disease, but so are stroke, cancer, and heart failure. So why should the government subsidize the sale of one drug and not another?
7. Donald Trump’s refusal to disclose his tax returns. A president’s policies matter more than his personal finances, but still…. Candidates have been releasing their returns for four decades, and it is arguably more important than ever at a time when the president-elect has complex business relationships that raise conflict of interest issues.
6. The National Football League. In the tax equivalent of a personal foul, the league demands that that every state and city hosting the Super Bowl exempt tickets, parking, and entry to related events from sales taxes. It is actually worse than that. In 2014, New Jersey imposed sales taxes on tickets to the big game and then rebated $7.5 million--not to the fans who paid the tax--but to the league. Presumably because the NFL, which generated $12 billion in revenue last year, needs the money.
5. Washington State environmentalists. A carbon tax ought to be the dream of any environmentalist. Yet when one got on the Washington ballot this November, many self-described enviros successfully worked to kill it. Why? Largely because liberal groups couldn’t agree on what to do with the money. Now, they have neither the tax disincentives to using carbon nor the revenue. Good job.
4. Olympic Medal Dross. After years of trying, Congress voted to exempt Olympic medalists from federal income tax on the value of their swag and cash bonuses. The exemption is a windfall for professional athletes but does little or nothing for struggling amateurs. At the last minute, lawmakers did limit the tax break to athletes with income of $1 million or less. But just because it could have been worse doesn’t keep this one off the list.
3. Hillary Clinton’s proposed tax increases on the rich. It was no surprise that Clinton wanted high-income households to pay higher taxes. The problem was her penchant for making them so complicated. She proposed a four percent surtax. And a 30 percent minimum tax. And a cap on the value of deductions. And a complex schedule of capital gains taxes based on how long investors held an assets. All on top of the existing Alternative Minimum Tax. She could have soaked the rich much more simply with a Bernie Sanders-like surtax.
2. Donald Trump’s 15 percent business tax. Trump would tax sole proprietors at 15 percent and wage earners at a top rate of 33 percent. TPC figures that even with anti-gaming rules this disparity would add more than $2 trillion to the debt over the next decade.
1. The Winner: Trump’s tax cut. Let’s get this straight: The economy is running at nearly full employment, wages are rising, the stock market is at record levels, and interest rates have gone up by 0.7 percent just since election day—and the president-elect is pushing a Keynesian stimulus that would add $7 trillion to an already-massive national debt over the next decade. And, yes, that includes the macroeconomic effects of the tax cuts. The Trump people insist his plan will be revenue-neutral. But that is not possible unless it is substantially rewritten.
The Lump of Coal Award can’t wait to see what happens in 2017.
