Tag: Tax Reform

Contributor Post Created with Sketch. We Need Corporate Tax Reform

 

This past week, House Republicans released their comprehensive tax plan, which received decidedly mixed reviews. The plan contains many contentious provisions dealing with the individual income tax, which I shall pass by here to concentrate instead on the two most dramatic proposals: to cut the corporate tax rate from 35 percent to 20 percent, and to reduce the tax on bringing back assets now held overseas from current levels, which today run as high as 35 percent, to a one-time tax of 12 percent on cash and 5 percent on illiquid assets. The dispute on the first concerns the impact of tax reduction on working-class incomes. On the second matter, the question is whether the money returned will enrich only corporate shareholders or have additional collateral benefits.

Regarding the first point, Kevin Hassett, the head of the President’s Council of Economic Advisors, claims that these large tax cuts will pay for themselves, and predicts that middle-class families that make around $83,000 per year will earn additional wages of between $4,000 and $9,000 once the full benefits of the tax reductions are realized. Those gains do not flow primarily from a change in tax brackets, which are sufficiently low that it is hard to cut them further. Instead, Hassett claims the lion’s share of the gains will stem from the increased expenditures on new businesses and new capital assets, which will, in turn, stimulate wage growth. As a Trump administration white paper observes, wage growth has nowhere to go but up. Under the Obama administration, wage increases averaged only 0.3 percent per annum, notwithstanding the administration’s explicit effort to make wage growth the centerpiece of its overall economic agenda. Direct efforts can’t work when many wage earners pay little or no income taxes. So indirect measures intended to spur wage growth are the only game in town.

One obvious point in favor of the Trump administration’s position on corporate tax rates is that the United States has lagged in the international tax derby; its 35 percent corporate rate is far higher than the rates of its major competitors, which are on average between 10 and 22.5 percent lower. Those hefty rate differentials have sent many American corporations overseas, while inducing foreign investors to decrease their stakes in the American market. Corporate financiers are experts at calculating internal rates of return, making it highly unlikely that tax breaks of this magnitude will not alter their behavior. The hard question is not whether tax cuts will stimulate activity, but, empirically, what the size of that response will be.

Contributor Post Created with Sketch. It’s Tax Reform Time!

 

Yesterday, congressional Republicans unveiled the Tax Cuts and Jobs Act. The $1.51 trillion plan is intended to be the first major rewrite of the tax code in three decades. Republicans hope to get this to the President before Christmas.

House Ways and Means chair Kevin Brady thinks it should pass the House by Thanksgiving and it’s been designed to pass the Senate using the reconciliation process, which only requires 51 votes. And we’ve been assured that it has the “full support” of the President. (You know, until he publicly undercuts them.)

But enough throat clearing, let’s get to the details!

Jim Geraghty of National Review and Greg Corombos of Radio America largely cheer the House Republican tax plan, which cuts business and individual tax rates, kills the death tax and simplifies the system. They also sigh as President Trump tweets out his desire to see this week’s Manhattan terrorist face capital punishment, a public statement many Americans agree with but could complicate federal prosecution of the murderer. And they highlight the latest development in Virginia Democrat Ralph Northam’s no good, very bad week, as the candidate for governor flip-flops and suddenly supports banning sanctuary cities in Virginia.

Bill shares his thoughts on the terror attack in New York City and how we should respond, particularly in regards to getting rid of the visa lottery program that allowed the attacker to come to the U.S. Then, Bill talks with Congressman Ron DeSantis about the attack, our immigration policies, and how Republicans should respond to the latest developments in the “Trump dossier” scandal. Bill interviews Congressman David Brat about the GOP plans for tax reform and what we can expect to see this week. Finally, Joel Farkas of the American Strategy Group joins Bill to discuss Pres. Trump’s potential nominees for Chairman of the Federal Reserve. They also discuss the upcoming next round of NAFTA renegotiations.

Jim Geraghty of National Review and Greg Corombos of Radio America applaud the Washington Post, not only for condemning the Latino Victory Fund ad that depicts Republican voters in Virginia as racists that want to run over minority kids but also slamming Democratic nominee Ralph Northam – whom the Post has endorsed – for a weak response to the ad. They also grieve for the victims of Tuesday’s terrorist attack in Manhattan and get frustrated as the media immediately tried to rule out Islamic terrorism and then insist it’s not a time for politics once they find out it was related to radical Islam. And they groan as congressional Republicans are forced to postpone the release of their tax reform bill because of ongoing disagreements within the party.

Recommended by Ricochet Members Created with Sketch. Everywhere You Look, Someone Wants To Stop MAGA

 

There is an unexpected group fighting the Republican tax cuts. The thing that bothers me here is that I don’t think the vast majority of Americans buy a home for their family so that they can deduct the property tax that comes along with it.

I moved into a new home in December and I never gave the property tax a second thought as a deduction. I wanted a home, a piece of the American Dream!

David French of National Review and Greg Corombos of Radio America applaud former NPR CEO Ken Stern for taking the time to meet voters in red states and realizing they are nothing like the caricature offered by the mainstream media. They’re also exasperated as President Trump and Tennessee Sen. Bob Corker resume their public feud and accomplish nothing other than choke momentum for tax reform and tax cuts. And they react with disgust to a University of Illinois professor who argues that proficiency in algebra and geometry perpetuates unearned white privilege and that “mathematics itself operates as Whiteness.”

On this AEI Events Podcast, Vice President of the United States Mike Pence delivers remarks at AEI on tax reform.

October 22, 2017 marked 31 years to the day that President Ronald Reagan signed the Tax Reform Act of 1986 into law. Now both the Trump administration and Republicans on Capitol Hill are again looking to bring tax relief to American businesses and families. Vice President Mike Pence joins AEI to discuss how to best fix the myriad shortcomings in the US tax code today.

Bill begins the podcast by sharing his thoughts on the big political stories of the week and why Pres. Trump has won the debate over the NFL and anthem protests. Next, Bill discusses the latest developments out of Las Vegas and highlights Steve Wynn’s recent comments about the killer and how to prevent another attack. Then, Bill talks with Mollie Hemingway about why Republicans need to seize the “Trump Moment” and get their agenda through before the upcoming elections. Finally, Joel Farkas of the American Strategy Group joins the show to explain why countries like France and India – not exactly right-wing governments – are copying Pres. Trump’s economic agenda and why no one is giving Trump credit for it.

Contributor Post Created with Sketch. We Need Flatter Taxes, Cleaner Rules

 

The Trump administration released a thumbnail sketch last week of its much anticipated tax plan, which has generated opposition and support from all the usual suspects. The critics of the plan take the view that the program will generate windfall subsidies for the rich and increase deficits while doing nothing for growth. Its defenders, including Treasury Secretary Steven Mnuchin, claim that the anticipated growth from lower tax rates will override any objections about increasing income inequality.

It is, of course, difficult to make predictions on matters such as economic growth. The overall effect of any tax plan depends not only on the plan itself, but on other government actions, such as spending rates, which have risen inexorably since the end of World War II, and interest rate increases by the Federal Reserve. It puts the cart before the horse to think about growth and deficits before getting the right tax structure into place. Once that is done, the needed response to changes in economic and financial conditions can be handled solely by changes in tax rates. The enhanced stability of the tax structure itself should be positive for growth. And on tax design, the Trump plan offers a mixed bag.

Politics aside, the best tax plan is also the simplest: I have long advocated that the sole source of general revenues should come from a flat tax, preferably on consumption and not income. A consumption tax eliminates the enormous difficulties of separating out capital gains, which are typically taxed at a lower rate, from ordinary income, taxed at a higher rate. If a consumption tax is unattainable politically, a relatively close substitute would be to defer capital gains taxes on any profits that are reinvested in other capital assets. No other forms of ad hoc taxation, such as the notorious medical device tax, should be used to raise general revenues.

Jim Geraghty of Natonal Review and Greg Corombos of Radio America sigh as liberal late night comedians demand new gun control legislation while getting their facts wildly wrong. They also react to reports that President Trump does not appear likely to embrace gun control efforts in the wake of the horrific attack in Las Vegas that killed dozens and wounded hundreds. And they shake their heads as White House Budget Director Mick Mulvaney – a deficit hawk while in Congress – says he is embracing deficits as part of the emerging tax reform legislation.

Contributor Post Created with Sketch. Tax Reform Framework: Can You Dynamically Score a Question Mark?

 

Washington’s “Big Six” negotiators have delivered an enormously expensive tax-cut plan to Congress. That seems locked in.

But will it be far less expensive once various tax breaks are scaled back or eliminated? Maybe. Maybe not. And the answer wouldn’t be so important if a) the federal debt-GDP ratio hadn’t doubled over the past decade, and b) there wasn’t a rising tide of government spending on older Americans. So, a big question mark there.

And elsewhere. On the personal side, we don’t exactly know who pays more or less. (Just what sort of middle-class tax cut might this be?) We don’t know if there will eventually be a new high-income surtax. (Right now, wealthier Americans almost certainly get a big tax cut.) We don’t know the one-time tax rate on foreign profits. We don’t know how government will prevent wage income from being reclassified as business income. How will a (maybe) $5 trillion tax cut fit into a $1.5 trillion budgetary hat?

Donald Trump gave a speech today in Indianapolis about tax reform.

Speaking in Springfield, MO, on August 30, 2017, President Donald Trump asked all members of congress — Republicans, Democrats, and Independents — to pass tax reform. He also asked Missouri voters to defeat Democrat Senator Claire McCaskill next year if she doesn’t vote for tax reform. Before speaking about tax reform, President Trump addressed the ongoing hurricane situation in Texas and Louisiana.

In this AEI Events Podcast, AEI’s Aparna Mathur hosts Senators Brian Schatz (D-HI) and Sheldon Whitehouse (D-RI), who present their carbon tax proposal. They discuss what their plan would entail and comment on the importance and controversy surrounding their proposal.

Following the senators’ remarks, a panel of experts discusses the possible costs and benefits of a carbon tax proposal. Veronique de Rugy (Mercatus Center) argues that the potential benefits of a carbon tax policy are complicated and minimized by the drawbacks. George Frampton (Partnership for Responsible Growth) believes that the only solution will entail bipartisan compromise. Myron Ebell (Competitive Enterprise Institute) states that a carbon tax is “all pain and no gain” due to the loss of revenue. Adele Morris (Brookings Institution) argued that the proposal is an efficient and comprehensive plan.

Contributor Post Created with Sketch. GOP Tax Cuts? See You in 2018 (Maybe)

 

Lawmaking is complicated stuff. Especially for big, complicated pieces of legislation. There are always going to be ups and downs and moments when the whole thing looks like it’s collapsing. But I would not have imagined six months ago that tax reform would be so difficult given GOP control of the White House and Congress. I mean, c’mon, it’s taxes. Cue the Robert Novak quote: “God put the Republican Party on earth to cut taxes. If they don’t do that, they have no useful function.”

Back in February, I wrote a gloomy post about the prospects for tax legislation, “The GOP tax plan is in trouble. Many people are saying this,” and got plenty of pushback for being so gloomy. President Trump would be signing a big tax cut by August, I was assured by Trump-connected folks. But now it’s May, and taxes look like a 2018 thing. At best. This from a Goldman Sachs research note last week:

Contributor Post Created with Sketch. Trump’s Tax Plan

 

The Trump administration has revealed a one-page tax plan that, if implemented, could have vast consequences for the economy of the United States. The high points of that plan are simplification and repeal. The brackets go down from seven to three—10%, 15%, 35%. Corporate tax rates are slashed from 35% to 15%. The standard deduction is doubled to about $24,000, removing large numbers of low-income people from the rolls. The alternative minimum tax and the special Obamacare capital gains tax of 3.8% are eliminated, along with the estate tax. Deductions for home mortgages and charitable donations are preserved, but those for state and local taxes are eliminated. The plan has drawn enthusiastic support from conservative commentators and withering criticism from Democrats. Where does the truth lie?

Any successful system of taxation must juggle three separate ends. The first is to impose as little drag as possible on economic productivity. The second is to minimize compliance costs for both the government and taxpayers. The third is to introduce some measure of distributional equity among taxpayers in light of the diminishing marginal utility of wealth—an additional dollar of wealth produces more satisfaction for the poor than the rich. Very few people flat-out deny this last proposition. If the total production of goods and services could be held constant, virtually all people would prefer a distribution that equalizes incomes across the population.

Unfortunately, however, this is not the case, for the demand for redistribution is in deep tension with the first two ends, which tend to reinforce each other. The full analysis is complicated, moreover, because the resource effects of taxation depend not only on who is taxed, but also on how tax revenues are spent. If these taxes fund standard public goods, like defense and infrastructure, they make taxpayers better off by overcoming the problem of collective action and contributing to growth. But the highly redistributive taxes of the modern social welfare state are not sustainable. Growth suffers, which, in the long run, hurts everyone across the income spectrum.

With the explosion of the American Health Care Act now nearly a full week behind us, one question remains: What now?

Mixed signals from the White House, the uncertain fate of tax reform, and a health care system still on a downward slope means the issue can’t simply be swept under the rug. That’s why we’ve brought in Ryan Ellis, Forbes contributor and co-founder of the Repeal Coalition, to dissect what went wrong and how Conservatives can navigate the shaky waters ahead.