The House passes its budget resolution. The GOP-controlled House passed its version of a budget resolution buy a vote of 219-206. The fiscal framework calls for more defense spending, big cuts in entitlement programs such as food stamps, and—of course—a tax cut. The House version contemplates a revenue-neutral tax bill, just one of many likely differences with the still-evolving Senate bill. The Senate Budget Committee OK’d its bill yesterday and the full Senate will take it up next week.
Kevin Hassett: How a corporate rate cut can create jobs and raise wages. In a Tax Policy Center speech, the Trump CEA Chair argued that cutting the corporate tax rate to 20 percent would raise the incomes of US workers by an average of $7,000, largely by ending income shifting from the US to lower-tax countries. TPC’s Howard Gleckman has another view: Transfer pricing and other income shifting generates little economic activity overseas, thus ending it would not help US workers much, either by creating new jobs or raising wages.
Big bucks behind backers of Big Six. The Koch Group is spending millions of dollars on ads designed to pressure Democrats—specifically three Democratic Senators—to back the unified framework. Sens. Joe Donnelly of Indiana, Claire McCaskill of Missouri, and Tammy Baldwin of Wisconsin all face reelection next year in states that backed Trump in the presidential race.
Treasury will keep one Obama-era rule to curb corporate inversions, for now. The rule reclassified some forms of debt as equity. Previously tax-exempt interest payments became taxable dividends, and “earnings stripping” became more difficult. Treasury ultimately expects a tax overhaul to eliminate the need for anti-inversion rules.
The IRS scrutinized liberal groups as well as conservative groups, TIGTA finds. The Treasury Inspector General for Tax Administration (TIGTA) found that while the IRS had selected 96 groups with names referencing “Tea Party,” “Patriot” or “9/12” for intensive review between 2010 and 2012, it also scrutinized even more—146 groups—with names referencing “Progressive,” “Green Energy,” “Medical Marijuana,” and “Occupy” between 2010 and 2013. TIGTA repeated its earlier criticism of the IRS: It was “inappropriate” to target groups based on their names rather than evidence of illicit political activity that would have risked tax-exempt status. Not clear why it took TIGTA nearly four years to identify the investigations of left-wing groups.
Infrastructure policymakers: Start here. TPC’s Tracy Gordon shared four ideas for infrastructure policy in her statement to the New Democrat Coalition 21st Century Infrastructure Task Force this week. In a nutshell: Spending benchmarks vary widely. All infrastructure is local. The federal government has many tools at its disposal. Funding is not the same as financing. Congress will have to balance many other issues, Tracy concludes, but these four are an evidence-based start.
Do excise taxes on alcohol reduce car crash deaths? TPC’s Rob McClelland and John Iselin have a new study of two Illinois tax increases. The state raised alcohol excise taxes in 1999 and in 2009. Rob and John find no evidence that either led to a long-term reduction in alcohol-related traffic fatalities. However, Illinois counties that do not share a border with another state (where buyers might be able to purchase less costly booze) experienced a temporary drop in alcohol-related traffic fatalities after the 2009 tax hike.
