From the White House in September: A tax plan in three- to five-pages. The Big Six, comprised of top Trump Administration economic aides and senior congressional Republicans, still vow to share a framework for overhauling the US tax code next month, but will not have accompanying tax legislation, reports CNBC. Meanwhile, GOP tax writing teams are considering whether retroactive tax cuts should be included in their as yet to-be-released tax plan.
Will a “Red Team” make the difference? The White House, led by legislative affairs director Marc Short’s “Red Team” comprised of Jared Kushner, Treasury Secretary Steven Mnuchin, and White House economic adviser Gary Cohn, is seeking common ground with moderate Democrats in a tax overhaul. They’re trying to avoid the same missteps that occurred in efforts to replace the Affordable Care Act. But where will they find a middle ground?
There will be more than a few distractions. Congress has only 12 legislative days left to raise the debt limit and pass a budget. Politico reports that GOP budgeteers are already considering temporary bills to push both issues to December. What will a prolonged budget debate mean for a tax bill? Then there is President Trump’s continued instance that Congress first replace the ACA. And his simultaneous rhetorical attacks against North Korea and Senate Majority Leader Mitch McConnell. Neither is likely to improve the odds of a tax bill this year
TPC’s Donald Marron asks whether our economy can really grow as quickly as the White House expects. He explains: “Maybe, but we’d need to be both lucky and good…. Scarred by the Great Recession and its aftermath, forecasters may be inadvertently lowballing potential growth. Good luck and good supply- and demand-side policies might deliver more robust growth than they anticipate. But those scars remind us we can’t always count on good policy, and luck sometimes runs bad.”
The nation’s fiscal outlook has not changed, which means it’s still not good. TPC’s Bill Gale and Berkeley’s Alan Auerbach have a new paper that explains. CBO projects that by the end of the fiscal year, the nation’s debt will hit 77 percent of GDP under current law and rise to 91 percent by 2027. Gale and Auerbach’s projections build their projections on a “business as usual” budget where defense spending grows with inflation, non-defense spending grows with inflation and population, mandatory spending follows current law, and all delayed tax provisions and temporary tax cuts would be permanent.
The federal budget window shouldn’t be extended. TPC’s Rob McClelland considers the demand from some legislators that the CBO expand its forecasting period from the current 10 years to 20 years or more. Trying to project the effects of legislation out two decades would increase uncertainty and give Congress two unappealing options, McClelland explains. “It could receive cost and revenue estimates that are highly sensitive to small changes in growth assumptions or behavioral responses to legislation, leading to a lack of precision in the long-term estimates. Or it could work with more stable but less accurate forecasts from models that it updates very slowly.”
Talk about a longer budget window… Wisconsin Governor Scott Walker wants to give electronics manufacturer Foxconn about $3 billion in refundable tax credits and other subsidies for building its first US plant in the southeastern part of the state. But Wisconsin’s Legislative Fiscal Bureau finds that the state would not break even on the deal until 2043—25 years from now.
Can state retirement savings initiatives fill in for myRAs? Urban Institute’s Richard Johnson reflects on the untimely death of “myRA,” the two-year-old program that encouraged workers to contribute to tax-preferred retirement accounts. But last month Treasury terminated the program, which lacked automatic enrollment, and never caught on. Johnson says state retirement initiatives may now offer the best hope to boost retirement savings—and state policymakers can learn from myRA’s failure.
A new problem for Cook County’s sugar tax. Politico reports that the US Agriculture Department has warned the Chicago-area county that its tax on sweet drinks may violate federal law. The problem: USDA bars localities from taxing goods purchased with food stamps (SNAP). The levy also faces several private lawsuits
A gun tax remains legal. Washington’s Supreme Court ruled in favor of Seattle’s “gun tax,” of $25 per firearm and 2 or 5 cents per round of ammunition, siding with the city and against opponents including the National Rifle Association.
In case you missed them: Deep dives into who pays for corporate taxes, and how to bring offshore profits home. The Wall Street Journal reports (paywall) that while investors and workers bear corporate tax burdens, the politics of tax-code changes hinge on which group carries the heavier load. The Journal also presents a pool-side chat on off-shore profits, different tax rates around the globe, and what it means for corporate tax reform. Swimsuits optional.
Congress is in recess. The Daily Deduction will resume its regular schedule when Congress returns.
