The following article by Eduardo Porter was posted on the New York Times website December 5, 2017:
President Ronald Reagan, with a replica of a federal income tax form, promoting his tax legislation in New Jersey in 1985. Credit Scott Stewart/Associated Press
It was the spring of 1985 when President Ronald Reagan first proposed to put an end to the state and local tax deduction. The idea was, to be sure, politically tricky. The provision had been around since the creation of the federal income tax in 1913, the budgetary expression of America’s celebrated federalism. As Justice Louis Brandeis might have put it, it was the federal government’s way to help pay for policy experimentation in the nation’s “laboratories of democracy.”
And yet to a Republican Party embroiled in a fundamental debate on how to shrink the government, it was an idea hard to resist: a direct shot at states’ capacity to spend. Bruce Bartlett, then a conservative tax expert who would go on to serve under Reagan and his successor, George Bush, estimated that without federal deductibility, state and local spending would fall 14 percent.
Nixing deductibility “threatens the political livelihood of spendthrift lawmakers across the nation,” Mr. Bartlett exulted at the time in an article for the Heritage Foundation. And it “would become more difficult for states to finance programs of doubtful benefit to their taxpayers by ‘hiding’ the full cost within the federal tax system.” Continue reading “Tax Plan Aims to Slay a Reagan Target: The Government Beast”
The following article by Jeremy W. Peters was posted on the New York Times website December 6, 2017:
So far, Americans for Prosperity and its field staff and volunteers have visited more than 41,000 homes and made 1.1 million phone calls. Credit Cassi Alexandra for The New York Times
MIAMI — A dozen high school students working for Americans for Prosperity, the conservative political network funded by Charles G. and David H. Koch, fanned out across the Little Havana neighborhood one day last week to make the case that the Republican tax bill was something to get excited about.
“We believe it’s time to fix our broken tax code and let families keep more of what they earn,” Barbara D’Ambrosio, a sophomore, dutifully told an elderly woman who answered the door in her slippers. After she finished her script, Barbara glanced up from the iPad she was carrying and asked if the woman would kindly call her senators to urge them to support the tax bill, which was hours away from being approved by the Senate.
The following article by Tom Jawetz, Sam Berger and Miguel Rodriguez was posted on the Center for American Progress website December 6, 2017:
U.S. President Donald Trump delivers a speech at the National Assembly in Seoul, South Korea, November 2017. Credit: AP/Lee Jin-man, Pool
In the early morning hours of Saturday, December 2, Senate leadership rammed through its tax bill, the final version of which had been drafted just a few hours earlier, on a party-line vote. The bill was a plutocrat’s dream: massive tax cuts for the wealthy and corporations paid for by increases in middle-class taxes and cuts to middle-class health care. But now, concerned about the backlash from his core supporters—who will bear the brunt of these toxic changes—President Donald Trump may be looking to win back favor by breaking his promise to Dreamers and shutting down the government.
The tax bill funds giveaways to donors by raising taxes on the middle class
I recently attended a presentation organized by the Plymouth Indivisible group, by Dr. Timothy Magee, representing the nonprofit “Healthcare for all Minnesota” in which he made an excellent argument for universal and single payer health care.
We learned that the United States has health services that are about average compared to European countries and Canada, and in many ways not as good, but we pay significantly more for that care. A large portion of that extra expense is ultimately used to run the health care insurance system, and another large portion is spent by health care provides doing their part of the insurance paperwork. Continue reading “Medicare for all will work better”
The following article by Kate Ackley was posted on the Roll Call website December 6, 2017:
Johnson Amendment repeal effort waged on many fronts
Credit: Jusbe via Morguefile
As lobbyists spar over whether the final version of the GOP’s tax bill should roll back a rule that prevents churches and charities from endorsing political candidates, their efforts could add another wrinkle to the year-end spending debate.
Although a House proposal to scale back what’s known as the Johnson Amendment may not survive the tax overhaul, supporters of the change could turn to a spending measure as Plan B. And groups wishing to preserve the Johnson Amendment, which has been a part of the tax code since 1954, say they will be on alert.
“If it doesn’t make it in the tax bill, we need to watch,” said Lisa Gilbert of Public Citizen, who supports keeping the restrictions in place.
The following article by Patricia Cohen and Jesse Drucker was posted on the New York Times website December 5, 2017:
A real estate investment trust helped rescue a stake held by Kushner Companies in 666 Fifth Avenue in Manhattan. Such trusts would get new advantages under Republican tax legislation. Credit Karsten Moran for The New York Times
After a frenzy of congressional action to rewrite the tax code, salesclerks and chief executives are calculating their gains. Business was treated with the everyone’s-a-winner approach that ensures no summer camper goes home without a trophy.
Some got special prizes. Cruise lines, craft beer and wine producers (even foreign ones), car dealers, private equity, and oil and gas pipeline managers did particularly well. And perhaps the biggest winner is the industry where President Trump and his son-in-law, Jared Kushner, made their millions: commercial real estate.
House and Senate Republicans, in their divergent bills, both offered steeply reduced rates to corporate giants, partnerships and family-owned firms across the board. But when it came time to eliminate special breaks or impose tighter standards, real estate was generally excused from the room. Continue reading “Tax Plan Crowns a Big Winner: Trump’s Industry”
The following article by Emily Gee was posted on the Center for American Progress website December 5, 2017:
Mitch McConnell Credit: Reuters/Joshua Roberts
Last week, the Senate dealt a blow to health care by repealing the individual coverage mandate as part of its tax bill. The Congressional Budget Office (CBO) has estimatedthat repeal of the mandate will result in millions more uninsured over the next decade, even if Congress approves a market stabilization package. A major portion of the newly uninsured would come from the individual market, where mandate repeal would raise premiums and drive some people out of coverage altogether.
The CBO projects that 4 million fewer people would have coverage in 2019 and 13 million fewer would be covered by 2025. As a result, the share of the nonelderly population that is uninsured would swell to 16 percent by 2025, compared with about 10 percent currently. By simply allocating the 13 million proportionally across states, the Center for American Progress estimates that, on average, about 29,800 more people would be uninsured in each congressional district by 2025 under the Senate Republican tax bill. CAP previously published state-level estimates of coverage reductions due to mandate repeal here. Continue reading “Estimates of the Increase in Uninsured by Congressional District Under the Senate GOP Tax Bill”
NOTE: With the passage of the U.S. House and U.S. Senate tax bills (we prefer to refer to them as scams), we thought a look at where the country’s corporations actually are would be a good idea.
The following article by Jonathan Berr was posted on the cbsnews.com website September 21, 2016:
U.S. businesses have amassed an overseas cash hoard of $2.4 trillion because they aren’t paying their fair share of taxes, according to two think tanks. But that view is at odds with how Republican Presidential nominee Donald Trump and fiscal conservatives see it. They say the U.S. corporate tax rate is too high.
The Economic Policy Institute (EPI) and Americans for Tax Fairness argue that U.S. corporate profits are at record highs while business tax revenue as a share of GDP is at record lows. Businesses can take advantage of loopholes to lower their bills to Uncle Sam, including one that enables them to indefinitely postpone the payment of taxes on profits earned overseas. The think tanks estimate that this strategy costs the U.S. Treasury about $126 billion a year in lost revenue.
“The facts show that corporate America is not overtaxed and, in fact, goes to extraordinary lengths to avoid paying what they owe,” said Frank Clemente, executive director of Americans for Tax Fairness, in a news release. “We hope this book of data can help change the false narrative on taxes peddled by wealthy corporations and their allies in Washington.”
The U.S. marginal, or statutory, corporate tax rate of 35 percent is the highest among the industrialized countries that are members of the Organization for Economic Cooperation and Development. Those who see that rate as too high have long argued that it places U.S. businesses at a competitive disadvantage.
Trump, a real estate tycoon turned reality TV star, has called for lowering the rate to 15 percent. Democratic nominee Hillary Clinton has called for corporations to pay their “fair share of taxes” and promises to make so-called inversion deals, in which businesses give up their U.S. domicile and move to a country with lower rates, harder to execute.
Like most issues regarding taxation, this one has no shortage of opinions, especially because many U.S. companies don’t pay the 35 percent rate, thanks to loopholes and other tax breaks. A 2013 Government Accountability Office report estimated the levy that businesses actually paid — also called the effective tax rate — at 10.6 percent. At times, some Fortune 500companies have wound up paying little at all in U.S. income taxes.
“A lot of large, multinational corporations are trying to lower their tax bills,” said Hunter Blair, a budget analyst with EPI. “They’re holding out for another 2004 tax holiday,” which allowed companies to repatriate cash held abroad at a much lower rate than usual.
Apple (AAPL), Pfizer (PFE), Microsoft (MSFT) and General Electric (GE) now account for roughly one-quarter of the overseas cash pile generated by U.S. companies. According to data from Credit Suisse cited by the EPI’s Blair, about half of U.S. foreign earnings are repatriated or earmarked for future repatriation.
The U.S. is one of the few countries where companies are subject to tax on their profits regardless of where the profits occur instead of a “territorial” system that exempts foreign profits of foreign multinationals from domestic taxation. Having the highest corporate statutory rate doesn’t help matters either, according to Tax Foundation economist Kyle E. Pomerleau.
“This means if a company wants to invest in a new factory that would employ workers, it needs to think about what the additional tax will be on that next investment,” he wrote in an email. “Although the effective rate is important in many respects, it usually has little to do with how the tax impacts the economy. Reducing marginal tax rates would be beneficial regardless of what you think the level of taxation should be.”
The following article by Daniel Hemel, Assistant Professor of Law at the University of Chicago, was posted on the Conversation website December 4, 2017:
Protest signs are seen in front of the office of Sen. Marco Rubio (R-Fla.) as protesters urge him and others in the U.S. Senate to vote against the $1.5 trillion tax cut. Credit: Joe Raedle/Getty Images
The tax bill passed by the Senate in the wee hours of Dec. 2 will – if it becomes law – widen the gap between the rich and the poor at a time when income inequality is already approaching historic heights.
Initially, most U.S. households are likely to experience a modest tax cut under the Senate plan. However by 2027, the average family earning less than US$50,000 would pay about $250 more in taxes under the Senate plan, while the average family earning more than $1 million would experience a tax cut topping $8,000 a year, according to estimates from Congress’s own Joint Committee on Taxation.
The following article by Jim Tankersley was posted on the New York TImes website December 4, 2017:
As the Senate prepared to vote on its tax bill, Republican Senators criticized the nonpartisan Joint Committee on Taxation over its analysis that the bill would increase the deficit by $1 trillion. Credit Tom Brenner/The New York Times
WASHINGTON — A Republican requirement that Congress consider the full cost of major legislation threatened to derail the party’s $1.5 trillion tax rewrite last week. So lawmakers went on the offensive to discredit the agency performing the analysis.
In 2015, Republicans changed the budget rules in Congress so that official scorekeepers would be required to analyze the potential economic impact of major legislation when determining how it would affect federal revenues.
But on Thursday, hours before they were set to vote on the largest tax cut Congress has considered in years, Senate Republicans opened an assault on that scorekeeper, the Joint Committee on Taxation, and its analysis, which showed the Senate plan would not, as lawmakers contended, pay for itself but would add $1 trillion to the federal budget deficit.
Public statements and messaging documents obtained by The New York Times show a concerted push by Republican lawmakers to discredit a nonpartisan agency they had long praised. Party leaders circulated two pages of “response points” that declared “the substance, timing and growth assumptions of J.C.T.’s ‘dynamic’ score are suspect.” Among their arguments was that the joint committee was using “consistently wrong” growth models to assess the effect the tax cuts would have on hiring, wages and investment.
The Republican response points go after revenue analyses by the committee and by the Congressional Budget Office, which scores other legislation, saying their findings “can be off to the tune of more than $1.5 trillion over ten years.”
The swift backlash helped defuse concerns about the deficit impact long enough for the bill to pass by a vote of 51 to 49. Some deficit hawks in the Senate caucus were sufficiently concerned about the report on Thursday night to delay the tax vote by a day, but the only Republican lawmaker to vote no was Senator Bob Corker of Tennessee, whose last-minute efforts to cut the size of the package or otherwise offset the deficit impact were unsuccessful.
Instead, Senate Republicans questioned the timing of the analysis’ release on Thursday, and a spokeswoman for the Senate Finance Committee released a statement saying the findings are “curious and deserve further scrutiny.”
Republicans say the committee’s model underestimates how workers will respond to lower taxes and how private investment affects growth. They also say the model assumes that the Federal Reserve will raise interest rates faster than Republican lawmakers expect, which would make borrowing more expensive and could slow economic growth.
That sentiment was repeated over and over, before and after the vote. “We think they lowballed it,” Senator John Cornyn of Texas, the majority whip, told reporters on Thursday. On Sunday, Senator Tim Scott of South Carolina said on CNN that “there’s no doubt that the J.C.T. has been consistently underestimating the activity in our economy.”
In the final hours before and after the bill passed, party leaders insisted that the tax plan would produce enough economic growth to pay for themselves with additional tax revenue from growing businesses and higher-paid workers. “I’m totally confident this is a revenue-neutral bill,” Senator Mitch McConnell of Kentucky, the majority leader, told reporters early Saturday morning after the vote, adding that he believed the bill would actually be a “revenue producer.”
Yet there was no data to support those claims, despite promises by the Trump administration that such an analysis would be forthcoming. The Treasury, whose secretary, Steven Mnuchin, has said repeatedly that his department was working on an analysis to show how the tax cuts would not add to the deficit, has not produced any studies that back up those claims. Last week, the Treasury’s inspector general said it was opening an inquiry into the department’s analysis of the tax plan.
The attack on the joint committee and its analysis is a change from the praise Republicans have long heaped on the body, which is staffed with economists and other career bureaucrats who analyze legislation in depth.
“The people who prepare our cost estimates are the best in the business, and they’ve been working on this issue for years,” Republicans on the House Budget Committee said on a page that was restored to the committee’s website on Monday afternoon, after what staff members said was an accidental deletion during a site redesign this year.
At stake in the debate is more than the reputation of the economic analysts whose lifeblood is understanding the vagaries and intersections of the federal budget and tax code.
If Republicans are wrong and the joint committee is correct, the tax bill will add to an already worsening fiscal forecast in the United States. The federal government is already running an annual deficit of nearly $700 billion. The amount of federal debt has surpassed $20 trillion, and it is projected to grow by another $10 trillion over the next decade as government safety net spending rises because of retiring baby boomers and increasing health care costs.
The joint committee did find that the tax bill would rev up economic growth but, like other studies, it would not be enough to offset the loss of tax revenue. The analysis found growth from the tax cuts would offset $458 billion in lost revenue, but $51 billion of that would be eaten up by additional interest costs on money the United States would need to borrow to pay for the plan. That would leave just $407 billion to offset a nearly $1.5 trillion tax cut, the committee found.
Other independent analyses echo the joint committee’s findings. The Tax Foundation, which tends to find high growth effects from tax cuts, projected the House version of the tax bill would increase deficits by about $1 trillion after factoring in economic growth. The Tax Policy Center, which tends to find much smaller effects, estimated the deficit increase at nearly $1.5 trillion. So did the Penn Wharton Budget Model, which is run by a former Bush administration economist, Kent A. Smetters.
Both the Penn model and the Tax Policy Center’s model found the Senate version would increase deficits by more than $1 trillion after accounting for growth; the Penn model in particular produced a near-identical score to the joint committee’s. The Tax Foundation did not complete an analysis of the Senate bill as amended in committee, when senators made several large changes to the bill including sunsetting its tax cuts for individuals in 2025.
Until Thursday, though, Republicans could dismiss those findings by pointing to the lack of analysis from the joint committee. The House bill was passed two weeks after it was introduced, before the committee could issue a so-called dynamic score of the bill, one that estimates the legislation’s cost in light of its effect on the economy. When the Senate analysis was finally released, Republicans, who pushed the bill through Congress at such lightning-fast speed that the final bill had handwritten changes in the margins, questioned the timing.
“How is it,” they wrote in their response points, “that J.C.T. found the time to produce and make public its macroeconomic analysis of the Senate bill, when it has yet to produce the same analysis of the House bill that passed weeks ago.”
In a November 28 email shared with The New York Times, the committee’s chief of staff, Thomas A. Barthold, said the committee had suspended its work on the House bill dynamic score in hopes of producing an analysis of the Senate bill before a final vote.
Looking at the calendar, Mr. Barthold wrote, “I made the decision to have my macro colleagues devote their time to producing a macroeconomic estimate of the Finance bill in time for the Finance Committee’s report (in this we failed) or in time for the Senate’s debate on the legislation. My colleagues and I reasoned that we could then return to complete work on H.R. 1” — the House bill — “and with good fortune have the two analyses available for a potential conference.”
The blowback came, in part, from lingering anger over unfavorable analyses of Republican health care plans by the budget office earlier this year, according to a Republican Senate aide. A finding that contradicted their philosophical belief that tax cuts will generate significant growth and revenues inflamed their suspicions.
Instead, they found comfort in ballpark estimates offered by some conservative economists, that the tax bill could increase the size of the economy by as much as 4 percent over a decade, or 0.4 percent a year. Mr. Smetters, of Penn, said that number is actually much higher — that the economy would need to grow by at least an additional 0.57 percent a year for tax cuts to pay for themselves.
Not even the most optimistic analysis of the Senate bill projected it would unleash anywhere close to that rate of additional growth.
