Will the Charlottesville fallout dim prospects for a tax bill? House Ways & Means Chair Kevin Brady says President Trump is crucial to reform efforts, but some in the GOP and many in the business community are distancing themselves from the White House. After all, “It’s a pretty tough transition from ‘white supremacists aren’t so bad’ to ‘let’s do tax reform,’” Josh Holmes, a longtime McConnell ally, told The Washington Post. Will firing economist nationalist Stephen Bannon make that shift any easier?
But what does the GOP want? There’s still no clear agreement on what a Republican tax reform plan will look like. For example, will it include “full expensing,” which allows companies to immediately deduct the cost of capital investments? Then, there is the price tag. Tax cuts for the wealthiest will result in deficits in the short-run, acknowledges Brady. But Speaker Paul Ryan still wants a bill that does not add to the debt.
Someone eventually will have to pay for those tax cuts. TPC’s Bill Gale and Surachai Khitatrakun and Aaron Krupkin of the Brookings Institution look at who may get the bill. They examine three financing scenarios for tax proposals consistent with what President Trump proposed in April. Under two, nearly all households would have lower after-tax income than under current law. Under the third, 36 percent of households would face net tax increases while the highest-income households would receive the largest increases in after-tax income.
Maybe if they add a carbon tax… Democratic Senators Sheldon Whitehouse of Rhode Island and Brian Schatz of Hawaii think now is the time to advance a tax on carbon, which they think could win bipartisan support. They propose a $49 per metric ton fee on greenhouse gas emissions that could raise $2.1 trillion in the first 10 years. They’d use some of the money to reduce the top corporate tax income rate. While White House economic adviser Gary Cohn has expressed interest in a carbon tax, the president and other top aides have thrown cold water on the idea.
How do you solve the problem of bipartisan health care reform? Robert Pozen, chair of TPC’s Leadership Council, will have a new article in the journal Health Affairs—out tomorrow—on pragmatic ways to improve the Affordable Care Act, including tax provisions.
Meanwhile, states could raise revenue by boosting booze taxes. TPC’s John Iselin explains that 21 states raised their tobacco or cigarette taxes between 2010 and 2017, but over the past 35 years, “38 states have seen a real decline in beer taxes and 37 in wine taxes. Why? It could be because distributors of alcohol are effective lobbyists or it could reflect popular preferences.”
Then there’s that sales tax revenue from online sales. President Trump seems to think Amazon doesn’t collect sales tax (it does). His recent Tweets do raise an interesting question: “Should government require firms that serve as online platforms for third party sellers to collect tax on their behalf?” TPC’s Howard Gleckman doesn’t think so—and explains why.
Save September 7 for TPC’s Tax and Immigration event. One in four Americans are immigrants or children of immigrants. How do they interact with the US tax system? Leading experts will discuss the challenges immigrants face and how current policies and possible changes would affect them. TPC’s Kim Rueben, director of the Urban Institute’s State and Local Finance Initiative, will share results from a National Academies of Science report on the economic and fiscal effects of immigration.
Australia to multinationals: Don’t try to reduce taxes by dodging earnings stripping rules. Chevron has withdrawn its appeal to the Australia’s High Court over a A$340 million ($268 million) tax bill. The Federal Court ruling stands: Chevron underpaid taxes by setting up an offshore intercompany credit facility with an abnormally high interest rate, effectively lowering its taxable income within Australia.
Oops. The Aug. 14 Daily Deduction erroneously attributed a story about the "Big Six" fall tax proposal to CNBC. The story was first reported by Reuters.
Congress is in recess. The Daily Deduction will post Mondays until Congress returns.
