Budget & Taxes

If You’re a Poor Person in America, Trump’s Budget Is Not for You

“If you’re a poor person in America, President Trump’s budget proposal is not for you,” Steven Mufson and Tracy Jan write for The Washington Post.

“Trump has unveiled a budget that would slash or abolish programs that have provided low-income Americans with help on virtually all fronts, including affordable housing, banking, weatherizing homes, job training, paying home heating oil bills, and obtaining legal counsel in civil matters.”

“During the presidential campaign last year, Trump vowed that the solution to poverty was giving poor people incentives to work. But most of the proposed cuts in his budget target programs designed to help the working poor, as well as those who are jobless, cope.”

The Massive Tax Cuts for the Rich Inside the GOP Health-Care Plan

Washington Post: “Just two provisions in the Republican plan would allow the richest households to pay an average of nearly $200,000 less under the GOP plan, according to the nonpartisan Tax Policy Center.”

“One is 0.9 percent on taxpayers earning more than $200,000 in wages and salaries a year, or $250,000 for married couples. Those households must also pay a surcharge of 3.8 percent on income from several kinds of investments. Together, these taxes are projected to raise $346 billion over the next decade, according to the nonpartisan Congressional Budget Office.”

“At the same time, working- and middle-class households would no longer receive the same financial assistance that Democrats established to help them buy health insurance.”

‘America First’ Really Means ‘Americans Last’

“‘America first’ really means ‘Americans last,'” Catherine Rampell writes for The Washington Post.

“On Monday, the Trump administration told reporters that the president’s budget will boost annual defense spending by 10 percent, or about $54 billion.”

“Trump is nominally a fiscal conservative (with the help of some fuzzy math). So he also promised that his increase in defense spending would be offset by equivalent cuts to non-defense spending.”

“And who suffers as a result? Regular Americans, including millions who voted for Trump.”

The Robot That Takes Your Job Should Pay Taxes, Says Bill Gates

Quartz: “Robots are taking human jobs. But Bill Gates believes that governments should tax companies’ use of them, as a way to at least temporarily slow the spread of automation and to fund other types of employment.”

“In a recent interview with Quartz, Gates said that a robot tax could finance jobs taking care of elderly people or working with kids in schools, for which needs are unmet and to which humans are particularly well suited. He argues that governments must oversee such programs rather than relying on businesses, in order to redirect the jobs to help people with lower incomes. The idea is not totally theoretical: EU lawmakers considered a proposal to tax robot owners to pay for training for workers who lose their jobs, though on Feb. 16 the legislators ultimately rejected it.”

A Tax Overhaul Would Be Great in Theory. Here’s Why It’s So Hard in Practice.

Neil Irwin: “A short list of the plan’s potential benefits looks awesome: It would give companies more incentive to keep jobs in the United States, less to overextend themselves on borrowed money and provide vast savings by reducing what companies spend on tax lawyers, who help them game the current system.”

“Yet these changes could also set off a cascade of more harmful effects. The plan could shift trillions of dollars of wealth from Americans to foreigners; set off an emerging markets financial crisis; wreak havoc in global oil markets; and cause sustained harm to the American higher education and tourism industries (including, as it happens, luxury hotels with President Trump’s name on them).”

“Welcome to the real world. The tax code has been flawed and inefficient for a very long time, precisely because fixing it could be so terribly disruptive.”

How Microsoft Avoided Billions in Taxes, and What the GOP Says It Will Do About It

Washington Post: “On paper, Microsoft’s facility in Puerto Rico was wildly profitable. With just 177 workers, the plant recorded $4 billion in earnings in 2011, a Senate investigation found.”

“The gimmick was entirely legal. According to the Senate’s report, the software company’s lawyers were channeling its profits from sales all over the country through the Puerto Rican operation, getting Microsoft out of about $1.5 billion in taxes a year.”

“It was the kind of scheme that designers of congressional Republicans’ tax proposal hope to eliminate. The vast sums Microsoft saved hint at how much money is at stake for corporations that rely on similar strategies to reduce their taxes, which are especially common among technology firms and other companies with valuable brands, patents and copyrights.”

Two Tax Ideas That Can Revive the American Dream

Joshua Rosner: “One idea: Create a new, tax-free ‘housing personal savings account.’ Similar to a health savings account or the 529 plans that people use to save for college expenses, it would allow prospective home buyers or their immediate relatives to set aside money for a down payment on a first home, or for the upfront cost of a first-time rental.”

“A second idea: Grandfather existing mortgages and then phase out the mortgage-interest tax deduction and replace it with an ‘equity principal tax credit,’ which would allow people to deduct a portion from their tax bill of the amount of principal that they paid down each year.”

“Taken together, the two programs would significantly increase the number of first-time home buyers with larger down payments, reducing the risk of defaults and potentially lowering mortgage rates. By creating incentives to get out of debt quickly, they might also reduce demand for the 30-year fixed-rate mortgage, allowing the government to reduce its role in the market. No less important, they could enable more Americans to retire in prosperity, without having to rely on government safety-net programs to make ends meet.”

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.”