True reform will require a bipartisan consensus around closing loopholes to pay for the lowering of statutory tax rates paid by businesses, and reducing burdens on working families. Changing tax law must be done in a fiscally responsible way, without cutting taxes for the very wealthy.
First, changes in the tax rates for individuals must at least maintain the current levels of progressivity
- Cutting tax rates for the very wealthy would deepen the income inequality that underlies the anxiety and anger among American voters. If Congress doesn’t preserve or increase progressivity, we won’t have the resources to pay for investments like infrastructure and child care.
- .. Congress must also maintain the estate tax, which is levied only on estates worth more than $5.49 million ($10.98 million for a couple), affects only the wealthiest 0.2 percent and protects small businesses, including family farmers.
- .. Many of the estates that are taxed have assets that have increased in value but have never been subject to capital gains tax, and never will be. The idea that the estate tax imposes double taxation is largely a myth.
- Second, tax cuts must be offset by revenue-raising measures. With the country in the ninth year of an economic recovery, the case for pure stimulus is weak, and digging a deep hole of debt by cutting taxes will make it harder to pay for other priorities.
- Tax cuts need to be revenue neutral, paid for by reducing tax subsidies, ending loopholes or generating new revenue.
- Third, Congress should rely on its Joint Committee on Taxation and the Congressional Budget Office to estimate what a tax bill will cost.
- Claims that tax cuts pay for themselves must be treated with great skepticism.
- Such a reckless move would almost surely produce an explosion of debt. In 1981, 2001 and 2003, tax cuts based on projections that they would largely pay for themselves did not, and when deficits soared, future presidents had to make hard choices to restore fiscal stability.
- Fourth, business tax reform must not open up new loopholes for top earners to evade taxes. Proposals to lower the tax rate on “pass-through” income (income that partnerships, sole proprietorships, S corporations and limited-liability companies “pass through” to owners) would create a costly, unpoliceable loophole. Wealthy individuals and businesses could easily reorganize on paper to take advantage of low pass-through rates.
- most pass-through income goes to wealthy individuals and big businesses like hedge funds and large oil and gas pipeline companies organized as limited partnerships.
- Kansas instituted a similar policy in 2012 and repealed it this year after 100,000 new pass-throughs emerged — among them the coach of the University of Kansas basketball team, who had his salary paid to a pass-through entity to escape state income tax. Yet job and economic growth in Kansas lagged that of most neighboring states, evidence that the policy did not produce the growth that supporters promised
Politicians, Promises, and Getting Real
both stories raise the question of how much, if at all, policy clarity matters for politicians’ ability to win elections and, maybe more important, to govern.
About elections: The fact that Trump is in the White House suggests that politicians can get away with telling voters just about anything that sounds good. After all, Trump promised to cut taxes, protect Social Security and Medicare from cuts, provide health insurance to all Americans and pay off the national debt, and he paid no price for the obvious inconsistency of these promises.
.. True, Republicans long paid no price for lying about Obamacare; in fact, those lies helped them take control of Congress. But when they gained control of the White House, too, so that the prospect of repealing the Affordable Care Act became real, the lies caught up with them.
.. During the campaign Trump could get away with posing as an economic populist while offering a tax plan that would add $6 trillion to the deficit, with half the benefit going to the richest 1 percent of the population. But this kind of bait-and-switch may not work once an actual bill is on the table.
.. Medicare for all is a substantively good idea. Yet actually making it happen would probably mean facing down a serious political backlash. For one thing, it would require a substantial increase in taxes. For another, it would mean telling scores of millions of Americans who get health coverage though their employers, and are generally satisfied with their coverage, that they need to give it up and accept something different. You can say that the new system would be better — but will they believe it?
Why Ryan, Undercut by Trump, May Actually Emerge Stronger
But in President Trump, his mercurial partner in the White House, the speaker deftly found a foil to deflect some of the anger that had felled the man he succeeded, John A. Boehner.
President Trump’s fiscal deal with Democratic leaders in Congress — which passed the House with more than a third of Republicans voting against it — infuriated House conservatives, who struck first at Mr. Ryan, but ultimately turned their ire on the Trump White House. By week’s end, the men feeling the lash were Mr. Trump’s Treasury secretary and budget director. If anything, Mr. Ryan may have emerged stronger.
.. “He didn’t create it; he’s reacting to it. I think he laid out a course that was acceptable to the conference as a whole, and to conservatives as well, and he had the rug pulled out from underneath him.”
.. He singled out Senator Mitch McConnell, the Republican leader, and Mr. Ryan by name, saying, “They do not want Donald Trump’s populist, economic nationalist agenda to be implemented.”
.. Mark Meadows, the North Carolina Republican and Freedom Caucus chairman, agreed, warning in an interview that failure on the tax plan would be “extremely damaging for the speaker and for all members of the G.O.P. conference, as well as the president.”
.. By week’s end, tempers among even some of the angriest members of the Freedom Caucus had cooled, and Mr. Meadows insisted that the rumors of a coup in the offing were false.
“I wouldn’t want his job for anything,” he said. “I have a hard enough time keeping 40 members of the Freedom Caucus together.’’
Some moderates said that in cutting a deal with Democrats, Mr. Trump may have done the speaker a favor, demonstrating to hard-line conservatives that they cannot always have their way.
.. As the meeting broke up, some conservatives seemed to feel almost sorry for the speaker. And some of the more unruly voices of the Republican conference were reassessing their uncompromising tone.
A 15-Percent Corporate Tax Rate Could Create an Enormous Tax Shelter
Combining a corporate tax rate of 15 percent with a top individual rate of 37 percent(another likely Trump proposal) would create a powerful incentive for wealthy people to squirrel away a large portion of their assets in a corporation. They’d pay 15 percent tax on profits versus 20 percent on capital gains and dividends or 37 percent on interest, rents, or royalties. If they hold their corporation until they die, they could transfer their assets tax-free to heirs, who could continue to accumulate lightly-taxed profits by simply keeping the assets in the corporation.