TPC adds up tax expenditures. Individual tax expenditures reduced federal revenues by $1.168 trillion in 2015, according to new estimates by the Tax Policy Center. And the biggest share of these subsidies went to the highest-income households. In their discussion of the new estimates TPC’s Daniel Berger and Yifan Zhang conclude, “Nearly all of us benefit to some degree from these individual tax breaks, but the highest income households benefit the most.”
Another country’s value-added tax is not a US-trade barrier. GOP presidential nominee Donald Trump suggested in Monday night’s debate that Mexico’s value added tax, or VAT, gives its producers an advantage over American companies. TPC’s Eric Toder explains the error in Trump’s thinking. “Mexicans pay the same Mexican VAT on taxable goods and services they buy in Mexico no matter where they are produced. At the same time, no Mexican VAT is imposed on goods or services consumed outside of Mexico, regardless of where they are produced… Trump’s claim that Mexico’s VAT gives its producers an advantage over American competitors is simply wrong.”
Congress has reached a short-term spending deal. Lawmakers agreed yesterday on a temporary spending bill that will keep the government running until December 9. The deal-maker was an agreement by House Republicans to allow a December vote on an amendment to a separate bill adding emergency funding for Flint and other communities with lead-contaminated drinking water. Congress will go home now. Then, after the election, have the same fights all over again—and maybe some new ones.
Business groups are skittish over proposed estate tax rules. In a letter to Treasury Secretary Jack Lew and congressional tax writing committees, business groups say “these rules would impose significant new tax costs on family-owned businesses, diverting capital from business investment, costing jobs and threatening the ability of families to pass businesses on to the next generation of owners.”
FATCA will get a closer congressional look. North Carolina Representative Mark Meadows wants to repeal the Foreign Account Tax Compliance Act, and the House Oversight and Government Reform Committee will soon hold a hearing on the law. FATCA requires foreign financial institutions to report to the IRS certain foreign accounts held by U.S. taxpayers, but Meadows says it has a chilling effect on business abroad and is too cumbersome for American expatriates. Past efforts to repeal FATCA have failed.
Four states may hike their cigarette taxes in November: Will increases change behavior? Four states have ballot initiatives to raise their levies: California (by $2), Colorado ($1.75), North Dakota ($1.76) and Missouri (15 cents). Would the tax hikes be big enough to cut cigarette consumption? The US Surgeon General reported in 2014 that every 10 percent increase in the price of cigarettes reduces smoking by 4 percent.
Congress is in recess. The Daily Deduction will post Mondays in the interim.
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