President Trump says he’ll impose tariffs on all Chinese imports. In his interview with CNBC, Trump escalated his trade war rhetoric, saying that he’s “ready to go to 500,” or $505 billion in US imports of Chinese goods—the total amount purchased in the US in 2017. Chinese consumers bought $129.9 billion in US imports in 2017. Treasury Secretary Steven Mnuchin says he “wouldn’t minimize” the chance that Trump makes good on his threat. So far, each country has raised tariffs on the other by $34 billion.
As tariffs spread, TCJA benefits dry up. The Tax Foundation has been tracking tariff talk and implementation. As of July 20—including the most recent “500” threat—it estimates that Trump’s import taxes would negate the benefits of the Tax Cuts and Jobs Act for workers: “If all tariffs announced by both the United States and foreign jurisdictions thus far were fully enacted, U.S. GDP would fall by 0.47 percent ($117.66 billion) in the long run, effectively offsetting one-quarter of the long-run impact of the Tax Cuts and Jobs Act. Wages would fall by 0.33 percent and employment would fall by 364,786.”
Tough trade times in Columbus, Indiana. Just over half of the economic output of the Columbus-region is tied to foreign purchases, according to the Brookings Institution. The Washington Post reports from the city, finding that its largest employer, Cummins, Inc., and other companies are facing the prospect of job cuts due to tariffs. Columbus is home to 40 foreign companies--more than half Japanese engine and auto-parts plants--employing almost 10,000 people. Columbus is interesting because Vice President Mike Pence was born and raised there, one of his brothers was a plant manager at Cummins, and another is running for Congress from the local district.
Taxing the gig economy. In its version of the IRS’s 2019 budget, the House Appropriations Committee would give the agency 90 days to improve tax compliance by self-employed workers. The panel’s report says it is “concerned a shift towards self-employed and independent contractors within an increasingly gig-based economy will correspondingly increase underpayment and underreporting of self-employed taxes."
A bill to index capital gains… Rep. Devin Nunes of California has introduced a bill to eliminate capital gains taxes on inflation. TPC’s Len Burman explains why this is a terrible idea. In a nutshell, think of complexity, regressivity, more tax shelters, and a growing national debt.
Also on the Hill this week. The House Judiciary Committee will hold a hearing tomorrow to examine the impact of the Supreme Court’s Wayfair ruling on consumers and small businesses g, which allows states to require online retailers to collect sales tax. The Senate Finance panel’s Subcommittee on Taxation and IRS Oversight will hold a hearing Thursday on improving tax administration. The full Finance Committee will hold a hearing to consider the nominations of Justin Muzinich to be Deputy Secretary of the Treasury and Michael Desmond to be Chief Counsel for the IRS and an Assistant General Counsel in the Department of the Treasury.
If you’d like to tell us about a new research paper or have any comments about the Daily Deduction, TPC’s summary of the day’s tax news, write Renu Zaretsky at [email protected]. You can sign up here to receive the Daily Deduction as an email newsletter every weekday morning (Mondays only when Congress is in recess) at 8:00 am.
