Budget & Taxes

Trump Will Use 4 Real Estate Business Tricks to Rebuild the U.S. 

Jay N. Rollins: “Trump’s real estate background provides him with the outline for how to fix the economy:”

  • “Spend money on the asset using debt”
  • “Make improvements that, when completed, will generate more income (in this case, infrastructure to improve commerce)”
  • “These new improvements will lead to more business, which will generate more cash flow (in this case economic growth)”
  • “The hope is that increased cash flow will outpace the growing debt”

“When it works, it can be very profitable. When it does not work, the project could end up in Chapter 11, like Trump’s New Jersey casinos.”

The Major Potential Impact of a Corporate Tax Overhaul

Neil Irwin: “The current corporate income tax manages the weird trick of both taxing companies at a higher statutory rate than other advanced countries while collecting less money, as a percentage of the overall economy, than most of them. It is infinitely complicated and it gives companies incentives to borrow too much money and move operations to countries with lower tax rates.”

“Now, the moment for trying to fix all of that appears to have arrived. With the House, Senate and presidency all soon to be in Republican hands and with all agreeing that a major tax bill is a top priority, some kind of change appears likely to happen. And it may turn out to be a very big deal, particularly if a tax plan that House Republicans proposed last summer becomes the core of new legislation.”

Will Donald Trump’s Corporate ‘Tax Holiday’ Create Jobs? Not Necessarily

Leslie Picker: “President-elect Donald J. Trump has said he would like to create a “tax holiday” so that American companies can bring back profit that was generated overseas at a lower rate. In his view, this influx of cash will create jobs.”

“But corporate boards and executives may have different ideas.”

“They are likely to use much of the estimated $2 trillion held overseas to acquire businesses in the United States, to buy back their own stock or to pay down debt, say advisers of America’s top corporate executives.”

House Republicans Are Proposing a Big Corporate Tax Cut That Walmart Hates

Dylan Matthews: “Congressional Republicans, overseen by Speaker Paul Ryan and led by House Ways and Means Committee chair Kevin Brady, are planning a major overhaul of corporate taxes, as unveiled in their ‘A Better Way’ plan from June.”

“But perhaps most dramatically of all, they want to allow companies to totally exclude revenue from exports when calculating their tax burden, and to ban them from deducting the cost of imports they purchase.”

“The plan is a very clever way to address the political goals of both House Republicans and Donald Trump. The president-elect has made it clear he wants a populist trade policy that’s tough on imports and backs exporters. And while its actual effects on trade are milder than you might expect, the House GOP border adjustment plan offers Trump something that sounds like a populist trade policy without resorting to actual tariffs. Meanwhile, House Republicans have wanted a major corporate tax cut for years, and border adjustment, by increasing taxes on imports, raises lots of revenue and makes it easier to afford a huge rate cut.”

“But that doesn’t mean the policy is a sure thing. It’s already made some major corporate players — including retailers, who depend heavily on imports, as well as Koch Industries — into skeptics of Republican tax reform efforts, earning the GOP some powerful enemies as it begins its first major effort to remake the tax code in fourteen years.”

How States Can Reduce Income Inequality

Elizabeth McNichol: “…state policymakers, over the years, have tended to choose tax policies that favor the wealthy over the poor and favor corporations over workers. For example, most states rely heavily on sales taxes, which hit low-income families especially hard because they generally spend (rather than save or invest) most or all of their income.”

“States can help push back against this trend by using tax policy to reduce inequality instead of worsening it. They can raise taxes on high-income households by boosting their top income tax rate and capping tax breaks for high-income taxpayers. They can also create or expand Earned Income Tax Credits for low- and middle-income workers, raise taxes on inherited wealth, and eliminate costly and ineffective tax breaks for corporations.”

We Should Get to Decide How the Government Spends Our Taxes

David Boaz: “Why shouldn’t taxpayers make direct decisions about how much money they want to spend on other government programs, like paying off the national debt, the war in Iraq or the National Endowment for the Arts? This would force the federal government to focus time and resources on projects citizens actually want, not just efforts that appeal to special interests.”

“To do this, we’d have to expand the concept of the campaign financing checkoff to all government programs. With this reform, the real expression of popular democracy would take place not every four years but every April 15. A new final page of the 1040 form would be created, called 1040-D (for democracy). At the top, the taxpayer would write in his total tax as determined by the 1040 form. Following would be a list of government programs, along with the percentage of the federal budget devoted to each (as proposed by Congress and the president). The taxpayer would then multiply that percentage by his total tax to determine the “amount requested” in order to meet the government’s total spending request. (Computerization of tax returns has made this step simple.) The taxpayer would then consider that request and enter the amount he was willing to pay for that program in the final column–the amount requested by the government, or more, or less, down to zero.”

The Very Interesting Thing That Happened When Obama Raised Rich People’s Taxes

Washington Post: “Just after President Obama won reelection four years ago, he and Congress increased taxes abruptly on the wealthiest Americans. In response, the rich paid up — and then went on with their lives as before, according to a new working paper.”

“Economist Emmanuel Saez estimated that, in the three years since the tax hike took effect, strategies used by the rich to reduce their reported income eliminated about 19 percent of the revenue the government could have collected from the tax increase had the wealthy not changed their behavior. This relatively small figure suggests the 2013 tax hike didn’t significantly affect rich Americans’ drive to make money, and Saez’s analysis of tax data shows the reported incomes of the wealthiest Americans, as a share of all Americans’ incomes, has continued to rise.”

Restructuring Subsidies Could Help Fix ObamaCare

Sarah Kliff: “For as long as I’ve covered Obamacare, I’ve always found Caroline Pearson to be an exceptionally smart and honest observer of the law. Pearson is a senior vice president at the research firm Avalere Health, and I called her up Tuesday morning to talk about Obamacare’s spiking premiums.”

Pearson: “I think what you have to do is rethink the subsidy structure and benefit design structure to make coverage more appealing for people between 200 and 300 percent of the poverty line.

If you look at the report that [the Department of Health and Human Services] put out on Monday, the average income of the marketplace population is 165 percent of the poverty level. It is a very low-income population.

The mandate penalties are not working to compel people into the market, but the subsidies are in. Absent higher mandate penalties, which even in a Democratic Congress is hard, you might see getting rid of the subsidies for people between 300 and 400 percent of the poverty line and doubling down on the people between 200 and 300 percent. If you could get better enrollment among that group, it might stabilize the market.”

A Child Born Today Comes Into the World With More Debt Than You

Bloomberg: “Under current law, U.S. inflation-adjusted debt per person is expected to reach the $66,000 milestone by April 2026, based on Bloomberg calculations of Congressional Budget Office and Census Bureau data.”

“So what would the debt path look like under either a Hillary Clinton or Donald Trump presidency? It would be pretty bleak in either case, according to a report released by the Committee for a Responsible Federal Budget.”

“The committee projects debt held by the public to grow by $9 trillion over the next decade under current law. Economic proposals put forth by both presidential candidates would add to the national debt, and Trump’s would add even more than Clinton’s. The report estimates that Clinton’s policies would increase the national debt by $200 billion over the next decade, while Trump’s proposals would add $5.3 trillion.”

By 2025, the Majority of Donald Trump’s Tax Cuts Would Go to the Wealthiest 1% of Americans

Washington Post: “By 2025, about 51 percent of the benefits of Trump’s tax plan would accrue to the wealthiest percentile of taxpayers, according to the Tax Policy Center’s analysis. Those wealthy taxpayers would save $317,000 on average each year, increasing their incomes by more than 14 percent.”

“Reducing taxes on the grand scale that Trump has proposed would mean far less revenue for the federal government. The government would have to either reduce spending, or borrow more to make up the difference.”

Why Thousands of Millionaires Don’t Pay Federal Income Taxes

Washington Post: “About 46 percent of all tax filers (individuals or households) pay no federal income taxes each year because of various exclusions. High-income tax filers make up a tiny portion of that number, but they are by far the biggest beneficiaries. More than half of the tax revenue lost to the most common tax exclusions stays in the pockets of the richest one-fifth of Americans, according to an analysis by the Congressional Budget Office.”

“While it’s rare for high-earners to pay no federal income tax, it’s not unheard of. In 2011, for instance, about 433,000 tax filers with incomes over $100,000 paid no federal income tax, according to estimates based on limited IRS data by the Tax Policy Center, a nonprofit think tank. That number includes approximately 4,000 filers with an income of $1 million or more.”

The most costly loopholes: individual retirement accounts not subject to federal taxes, interest on municipal bonds, and reduced tax rates on capital gains.

Sweden Wants To Fight Our Disposable Culture With Tax Breaks For Repairing Old Stuff

Fast Company: “How often have you taken a gadget or a pair of shoes in for repair and found out that fixing it will cost more than buying a new version? Too often, that’s how often. And Sweden is trying to fix this, by halving the tax paid on repairs and increasing taxes on unrepairable items.”

“The proposed legislation would cut regular tax on repairs of bikes, clothes, and shoes from 25% to 12%. Swedes would also be able to claim half the labor cost of appliance repairs (refrigerators, washing machines and other white goods) from their income tax. Together, these tax cuts are expected to cost the country around $54 million per year. This will be more than paid for by the estimated $233 million brought in by a new ‘chemical tax,’ which would tax the resources that go into making new goods and computers.”

Americans Appear Willing to Pay for a Carbon Tax Policy

New York Times: “The stumbling block in Congress for confronting climate change has perpetually been the economic challenge. There has been little support for paying to reduce greenhouse gas emissions.”

“But now, there is some evidence of a quiet undercurrent of support for a carbon policy, whether it be a tax, cap-and-trade or regulations.”

“The Energy Policy Institute at the University of Chicago (EPIC) — which, in full disclosure, I direct — and The Associated Press-NORC Center for Public Affairs Research released a poll Wednesday on how Americans feel about various issues related to climate and energy.”

By 2025, 99.6% of Paul Ryan’s Tax Cuts Would Go to the Richest 1% of Americans

Washington Post: “The House Republicans’ proposal for tax relief could force the government to borrow trillions of dollars to continue operating and might even weaken the economy, according to a new analysis from the nonpartisan Tax Policy Center.”

“By 2025, when the reductions would be fully implemented, 99.6 percent of the tax cuts would benefit the wealthiest 1 percent of Americans, according to the analysis. This group would enjoy the greatest relief as a share of their income (increasing their incomes after taxes by 10.6 percent on average) and in terms of dollars (an average annual savings of $240,000 for each household).”