A back-room tax deal? The Wall Street Journal explains (paywall) how the fate of tax reform in the in the hands of six lawmakers. House Speaker Paul Ryan, House Ways & Means Chairman Kevin Brady, Senate Majority Leader Mitch McConnell, Senate Finance Committee Chairman Orrin Hatch, Treasury Secretary Steven Mnuchin, and National Economic Council Director Gary Cohn have been meeting behind closed doors to craft a consensus bill. The back-room dealing is similar to the process that produced Congress’s stalemated health care effort. And at least one of the big six seems to be acknowledging the problem: “While this process may result in an agreed-upon framework, this will not be the be-all, end-all of tax reform…The idea that tax reform is going to be a closed-door exercise is absurd,” says Hatch.
About the House GOP tax plan. Howard Gleckman explains the latest TPC estimates: The House Republican leadership’s 2016 tax blueprint would reduce economic output by 0.5 percent by 2026 and add about $3.7 trillion to the nation’s debt over the 2017-2026 period.. By 2036, the plan would shrink output by between 1 percent and 2.6 percent and add between $4.3 trillion and $5.5 trillion to the debt. The TPC estimates use three different versions of dynamic scoring as well as a traditional model.
The future is now, and will last for three weeks. That’s how much time Congress has before it leaves for its month-long August recess. The Senate still hopes to vote on a health bill before leaving town. But it now faces more immediate problems: extending the debt limit and passing a budget. Both must be addressed before the end of September.
BCRA talks remain stalled. Conservatives strongly reject the idea of retaining the the Affordable Care Act’s 3.8 percent tax on net investment income. Some GOP senators proposed keeping the tax to fund more generous health care subsidies or soften Medicaid cuts. Individuals earning more than $200,000 and couples making more than $250,000 pay the tax on capital gains, dividends, and interest. Will its fate be a deal-breaker?
Eight Obama-era tax regulations are under review. Treasury is giving the public until August 7 to comment on 2016 rules. They include curbs on “earnings stripping” where companies load up their US operations with debt in order to reduce US taxes. TPC Director Mark Mazur explained that the rules aim to assure that “If you’re going to do inter-company loans, you should have a real bona fide loan.” Mazur led that regulatory effort as assistant Treasury secretary.
Illinois passes a budget, but still faces a shortfall. The state’s first budget in two years reduces spending by more than $2 billion and its new income tax rates are expected to raise $5 billion annually. But since the extra revenue won’t cover $15 billion in unpaid bills, the state still faces deep cash flow problems. And it still must figure out what to do about a $130 billion shortfall in government worker pensions.
A bike tax in Oregon. The state is the first to levy a sales tax on bicycles. An Oregon resident who pays $200 or more for a bike will pay a $15 sales tax. It will raise $1.2 million annually to build and maintain bicycle trails, footpaths, and multi-use trails.
Seattle City Council decides on an income tax today. Members will vote this afternoon on a 2.5 percent income tax on high-income residents. Singles would owe the tax on income exceeding $250,000 and married couples would owe on income in excess of $500,000. The tax would generate $140 million annually. It would be a first in Washington State, which has no income tax.
French Finance Minister: Cut spending and taxes? France needs to reduce its budget deficit to stay below the European Union’s limit of 3 percent of economic output. Finance Minister Bruno Le Maire says the new Macron government can reduce spending and cut taxes on individuals and businesses. One option: Delaying tax cuts for the wealthy and on capital income to 2019.
